Despite some colder-than-normal temperatures on the horizon, December natural gas futures probed lower values for a third consecutive day on Friday. The prompt-month contract recorded a $3.794 low before closing the regular session at $3.799, down 12.8 cents from Thursday's close and 13.8 cents lower than the previous week's close.
'Easy come, easy go' might have been the motto of futures bulls after they witnessed the four-day rally of 37.4 cents through Tuesday, Nov. 9 wiped out by the three-day decline through Friday of 41.1 cents.
Citi Futures Perspective analyst Tim Evans sees early winter weather playing a significant role in which path prices take. While futures continued to probe lower during Friday's trade, the analyst noted that lower temperatures on the horizon could provide support.
"Weather forecasts still include some colder-than-normal temperatures across the northern U.S., and the 11- to 15-day outlook is actually somewhat cooler than a day ago, adding some heating demand back to the market," he said. "Forecasts will have time to change again over the weekend, of course, but we think mere confirmation of today's outlook on Monday might be enough to push prices at least somewhat higher."
Other market watchers noted that futures seem preoccupied with the fact that Wednesday's 19 Bcf storage injection report for the week ending Nov. 5 pushed inventory levels to a new all-time high of 3,840 Bcf, The injection moved current inventories past the old all-time record level of 3,837 Bcf, which was notched for the week ending Nov. 27, 2009.
"While this week's EIA [Energy Information Administration] report indicated a smaller-than-expected storage injection, the market appears to be fixated on a record level of supply that will provide a major cushion amidst even the strongest winter requirements," said Jim Ritterbusch of Ritterbusch and Associates. "While day-to-day pricing activity will continue to be influenced by updates to the temperature views, we don't view the forecasts as capable of sustaining price advances until winter temperatures begin to make a larger dent in supply. In other words, we look for price rallies in the coming month to prove limited in duration as has been evidenced in the past month."
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