Bolstered by an eastern chill that is gripping the eastern third of the United States, natural gas futures bulls on Monday pushed the January contract to a high of $4.540. The prompt-month contract ended up finishing the regular session at $4.488, up 13.9 cents from Friday's close.

Despite the recent hike in values and the settling in of winter temperatures, some market watchers don't see much support for prices going forward. Citi Futures Perspective analyst Tim Evans warned that storage draws going forward will really have to be large to make an impact, because recent Decembers have also been really cold.

"The bump in natural gas prices this morning looks mostly like a reaction to 'it's cold now' rather than a compelling forward outlook, as the current week does look a bit colder than had been forecast last week, but [Tuesday] could be the coldest day in the cycle, with a warming trend of at least a few days to follow," he said.

"Warmer-than-normal temperatures in the western U.S. are also going to give something of an offset to the eastern cold, although on a population-weighted basis the eastern cold is the more significant aspect of the pattern," Evans added. "We also continue to note that because the second week of December has also been colder than normal in the recent past, the resulting storage withdrawals may not have that much of an impact on the year-on-five-year storage comparison. For example, based on [Monday] morning's runs we see the 347 Bcf year-on-five-year surplus from Nov. 26 dropping to 313 Bcf as of Dec. 3, but only netting a further decline to 307 Bcf as of Dec. 24. With that much of a surplus, we'd expect any period of milder temperatures in the Midwest and Northeast heating markets to undercut prices."

Last week forecasts of cold near-term weather in major energy markets were the dominant market drivers, and those outlooks are still in place. "The models at least agree that a major winter storm will be menacing the eastern half of North America in the first half of the six- to-10," said Matt Rogers, president of Commodity Weather Group, a Bethesda, MD-based forecasting firm. "They disagree on the track and this makes a big difference for temperature and snowfall. Right now, the thinking is that the East Coast should see some pre-storm warming this weekend and that the Midwest should see the biggest snow and cold impacts. However, the final track remains undecided. Otherwise, a general cold East and warm West pattern looks to continue. Some variability is seen at times, but the main blocking patterns are holding in place -- keeping the East cold," he said.

For the moment risk managers don't see a major market turn and are looking for a spot to reestablish short hedges. "It was a quiet week on the fundamental news front for the gas market. The gas market failed to participate in the bull run that a lot of commodities had this past week," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. DeVooght sees a strong possibility of a market move still higher and for the moment is biding his time. "We continue to feel that the gas market has a good chance to rally into the high $4, low $5 range. At that time we will monitor the market to see if there is good reason to reestablish our short producer hedges. On the speculative side we will continue to trade from the long side."

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