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Trader Sees $2.10 Spot Futures In Play, Yet December Called A Penny Higher

December natural gas is expected to open a penny higher Tuesday morning at $2.31 as traders factor in only nominal expected occurrences of colder temperatures and traders look for a spot to initiate short positions. Overnight oil markets were mixed.

Natgasweather.com in a noon Monday update said it sees weather patterns similar to the Pacific system now marching across the country as being representative through most of the month. Periodic brief drops in temperature are likely to increase heating demand, but nothing in the way of a sustained pattern is on the horizon.

"Below normal heating requirements continue to be the norm," the company said. "Essentially, the swings in temperatures in intervals of every three to four days will continue for the next two weeks with the eastern U.S. being to the warmer side and the western and central U.S. to the cooler side. There's still a fair bit of data that supports much colder pushing into the northern U.S. during the latter half of November, but the fact is it has yet to gain enough support in the weather and climate data overall."

For the week ending Nov. 14, the National Weather Service (NWS) forecasts well below normal accumulations of heating degree days (HDDs) in key population centers. New England is expected to see 137 HDD, or 21 fewer than normal, and the Mid-Atlantic is expected to have 121 HDD, or 24 below its normal seasonal tally. The greater Midwest from Ohio to Wisconsin is anticipated to experience 134 HDD, or 30 fewer than its norm for this time of year.

Traders see the December contract poised to take a dive. "This should remain a weather-driven market as this month proceeds," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients. "And while an unusually warm fall period is conjuring up images of an El Nino-driven mild winter, we feel that some occasional extreme cold spells are inevitable that will prove capable of spiking the market.

"On a very near term basis, we still expect an up move back into the $2.45-2.50 zone where we will look to re-establish some short holdings in anticipation of a price decline to around the $2.10 area per the December contract within about a two and a half-week time frame. As has been the case with the December futures, seasonal considerations will preclude the January contract from attaining this month's December contract lows."

In overnight Globex trading December crude oil added 39 cents to $44.26/bbl and December RBOB gasoline fell fractionally to $1.3702/gal.

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