Feeding off bleak fundamentals, which include the final act of the uneventful 2010 Atlantic hurricane season, November natural gas futures on Friday recorded a new 12-month low, which could open the door to even lower values in the weeks ahead.

The prompt-month contract recorded a low of $3.520 before closing the regular session at $3.535, down 12.2 cents from Thursday's finish and 11.6 cents lower than the previous week's finish. The last time a front-month contract traded lower than Friday was on Sept. 22, 2009, when the October 2009 contract recorded a $3.502 low.

"I was a little bit surprised Thursday that we saw such a large injection [91 Bcf] -- especially for this time of year -- and the market reacted by rallying. I'm not sure where that came from, but it obviously did not hold up," said Steve Blair, a broker with Rafferty Technical Research in New York. "What I wasn't surprised by was the new low on Friday considering the current fundamentals. On the daily continuation chart we've been following a down sloping trendline for the last few weeks. Now that we've recorded a new low, we view $3.500 as a pretty significant support number. If we break below that, the next number doesn't come in until $3.230."

Blair noted that it is going to be hard for the bulls to get any sort of traction for a meaningful rally considering all of the negative fundamentals. "Storage is plump, demand is light and supply just keeps coming. There does not appear to be an end in sight to these factors either," he told NGI. "Some of the estimates for the next storage report are calling for a build of around 100 Bcf. We've had absolutely no air conditioning load, the generation load is not there and we haven't been cold enough where the heating load is going to draw that much and overpower production. Sure, the current storage levels are 118 Bcf below year-ago levels, but you have to remember last year boasted a record amount of gas in storage. A better comparison is the five-year average, and we're now sitting at a 247 Bcf surplus.

"The market really has no reason to sustain any real rally, unless it gets real cold, really fast, and for a prolonged period. Otherwise, we're in a typical shoulder season, and the fact that we've had no real storm disruption in the Gulf of Mexico for the third year in a row really stacks the cards against the bulls."

Some market watchers hint that the current trading range may be insufficient to stem further price declines. "This market has moved into a consolidation phase during the past week as large speculators appear nearly saturated on the short side just as they may be on the long side of the petroleum complex," said Jim Ritterbusch of Ritterbusch and Associates.

In his view, building a fundamental case for lower natural gas prices is much easier than constructing a bullish case for the petroleum complex. "Other than a few remnants of tropical storm Paula and [an earlier] disorganized system in the southwest Caribbean, there are no significant storm developments on the horizon. And at this late stage of the hurricane season, no storm news is bearish news as long as temperatures remain moderate," he said.

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