November natural gas futures continued to probe lower price levels on Monday after Hurricane Richard weakened to a tropical depression and was expected to peter out over the Yucatan, sparing Gulf of Mexico energy interests and the Gulf Coast. The front-month contract reached a new low for the move of $3.255 before closing out the regular session at $3.317, down 1.5 cents from Friday's finish.

A front-month contract last traded lower more than 13 months ago when October 2009 futures recorded a $2.911 low on Sept. 14, 2009.

Surrounded by bearish fundamentals, natural gas bulls had been clinging to the possibility that Richard might run through the Gulf on a crash course with Florida. With that threat now over and the 2010 Atlantic hurricane season winding down over the next few weeks, the bulls might need to look to winter weather as their next savior, according to a New York analyst.

"With storage looking more and more plump with each passing week and gas demand looking a little stagnant, those looking for higher prices might need some longer-range glasses, because I'm just not seeing it," the analyst said. "Add to that the weak hurricane season and I think traders would like to fast-forward a bit to a point this winter when cold is cutting into gas inventories."

Others agree that there is little in the way of near-term developments to give the bulls any kind of respite from the pervasive selling. "Mild temperatures, lack of tropical storms toward the end of the tropical storm season and rising production are keeping the speculators' short positions intact," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm.

In his view natural gas futures "seem to be still searching for the bottom. It seems like the gas market has to go lower before it's going to get better. On a trading basis, we are going to continue to hold our short producer collar. We are hoping for some type of fall short-covering rally to give us an opportunity to add to our short hedges," he said.

Speculators' short positions may be intact, but according to data from the Commodity Futures Trading Commission (CFTC) directional traders preferred to exit some of those futures and options holdings for the week ended Oct. 19. In its Commitments of Traders Report the CFTC said at IntercontinentalExchange long futures and options (2,500 MMBtu per contract) increased by 34,339 to 311,526 and short positions also rose by 9,170 to 111,925. At the New York Mercantile Exchange long futures and options (10,000 MMBtu per contract) fell by 6,820 to 127,084 and short holdings decreased as well by 11,641 to 227,205. When adjusted for contract size, long holdings at both exchanges rose by 1,765 and shorts fell by 9,349. For the five trading days ended Oct. 19, November futures fell 11.6 cents to $3.513.

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