Short-covering was once again the name of the game at Nymex Tuesday as local and commercial traders lifted natural gas futures prices off early session lows and propelled the January contract to its fourth-straight positive close. Traders agreed yesterday’s advance was set in motion by new forecasts that suggest the record-setting warm temperatures across much of the country will soon be coming to an end. By virtue of its 5.6-cent gain and $2.803 settlement, the prompt contract has rallied more than 30 cents off last Wednesday’s $2.491 close.

According to the popular six- to 10-day forecast released Tuesday afternoon by the National Weather Service, the northern and central sections of the country can expect to see above normal temperatures through Dec. 21. Normal temperature readings, meanwhile, are forecast for the southeastern states, while only the Rockies and southwestern U.S. are expected to see below normal temperatures.

However, traders are becoming increasingly aware that by the time cold weather forecasts show up in the six- to 10-day outlook, it is often too late to take advantage of the news. In response, traders are turning to the eight- to 14-day forecast released by the NWS, or in some cases abandoning the NWS forecasts altogether in favor of private weather forecasting services. For example, Monday’s 18-cent price rally was set in motion by an undeniably bullish forecast released early in the morning by Maryland-based Earth Satellite Corp., calling for December to end on a chilly note for residents of the Midwest and Northeast (see Daily GPI, Dec. 11).

Then yesterday that private forecast received some validation when the NWS weighed in with a similar prognostication. According to the eight- to 14-day forecast released by the NWS, below normal temperatures are forecast for the entire East Coast, the Mississippi and Ohio River Valleys, and the eastern half of the Gulf Coast from Dec. 19 through at least Christmas.

Looking ahead, weather speculation will take a back seat to the latest storage figures when they are released at 2 p.m. EST today. Preliminary expectations are centered on a 10-40 Bcf withdrawal, which if realized will fall dramatically short of last year’s 158 Bcf net takeaway. Based on a lower number of degree days than previously forecasted by the NWS (131 down to 112), Thomas Driscoll of Lehman Brothers in New York has ratcheted down his previous prediction for a 40 Bcf withdrawal down to a 20 Bcf pull. Accordingly, he expects the year-on-year surplus to balloon from 699 Bcf to 837 Bcf. Last week the American Gas Association announced a 16 Bcf drawdown and the five-year average for this week is a 69 Bcf decrease.

In daily technicals, January’s inability Tuesday to climb back up to its Monday evening high of $2.854 is a sign of weakness, says Tim Evans of New York-based IFR Pegasus. A move lower would meet with support at Tuesday’s $2.67 low ahead of sturdier support at last week’s low of $2.45. However, if the market can make it five straight gains, look for selling in the $2.90-92 area ahead of psychological resistance at $3.00, assuming of course the $2.854 hurdle is surpassed.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.