Natural gas traders wasted little time doing something Mondaythey have haven’t done in a while — they took profits. Followinga string of four-straight advances, market makers wasted littletime testing Wednesday’s lows in the Sunday night access sessionand then again yesterday morning. The December contract was thehardest hit, shedding 20.9 cents to close at $6.368. Comparatively,the out months fared much better as traders rolled Dec longs intothe summer strip and calendar year 2001, both of which finished inpositive territory on the day.

Several trader were surprised by the market’s downturn followingan apparently bullish storage number that was released after themarket closed Wednesday. According to the American Gas Association,94 Bcf was withdrawn from underground storage facilities during theweek ending Nov. 17, decreasing working gas levels to 2,648 Bcf or80% full. Measured against last year’s 20 Bcf draw-down and thefive-year average of 52 Bcf, the report was bullish. In fact, notsince 1997 when 108 Bcf was pulled from storage has the AGArecorded such a large withdrawal so early in the season.Expectations ahead of the report also failed to stack up, astraders were generally looking for a 50 to 100 Bcf withdrawalnumber.

However other traders were pleased with retracement that theyfelt was long overdue. In just three trading sessions the Decembercontract erupted from a $5.625 low on Friday Nov. 17 to a $6.62high on Wednesday Nov. 22. One possible explanation for thesell-off, several traders agreed, was the release of a freshweather forecast Monday that calls for moderating temperatures forthe first week of December. According to the National WeatherService, above-normal temperatures are expected to span a wideswath of the center of the country from the Ohio River Valley tojust east of the Rocky Mountains. Meanwhile below-normaltemperatures are expected in the extreme Northeast and Southwestregions of the country. That however, represents a major departurefrom the forecast of just a week ago that predicted below-normaltemperatures across the entire country.

Based on the bearishness of that weather forecast, SusannahHardesty of Indiana-based Energy Research and Trading looks forcontinued downward momentum on December’s last trading day Tuesday.”This downside correction could continue through the expiration[December], and will most likely be the final downside move betweenthe D2 and D3 peaks of the fall high. Best estimate for thedownside support for December futures is at $6.00. Should thatlevel break down, either in December or January futures, pricescould continue to drop to $5.500 before completing the downsidecorrection,” she said.

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