Following on the heels of yet another early morning Accesstrading buying surge, natural gas futures pressed higher againMonday as short-term weather forecasts corroborated medium rangeoutlooks that last week called for an invasion of Arctic air notseen in the United States in several years.

January futures finished up 82.9 cents at $9.413 after notchinghighs of $9.86 and $9.65 in Access trading and in the regularoutcry session respectively.

Near blizzard conditions and a foot of snow in the Chicago areaclosed schools, cancelled flights and stranded motorists in theircars while Texans watched the mercury drop almost as fast as gasprices were rising. According to the National Weather Service,temperatures dropped 20 degrees in 20 minutes at College Station,TX just before 4 p.m. yesterday. Meanwhile, Houston Hobby Airportreported 79 degrees around 4 p.m. Monday afternoon, buttemperatures were expected to plunge into the 30s by this morning.

While traders often debate whether it was futures market pricesthat drove the cash market higher, or vice versa, there was littledisagreement yesterday as cash prices erupted above $10 at mostU.S. delivery points.

However, these high prices cannot be attributed solely to highdemand. Dangerously low levels of natural gas stocks are alsoresponsible, according to the Short-Term Energy Outlook for Decemberreleased last week by the Department of Energy (DOE)(see Daily GPI, Dec. 8). In fact, it estimatesonly 640 Bcf will be in inventory at the end of the first quarter of2001, nearly half the amount that was in storage at the close ofwinter in early 2000 (1.15 Tcf).

For many market watchers, this potential supply shortage shinesan even brighter spotlight on the weekly release of fresh storagedata by the American Gas Association. Last week the AGA said thatinventories decreased 73 Bcf for the week ending Dec. 1, bringingstorage levels to 2,429, or 12% below the five-year average.

Looking ahead, however, the shortfall will likely get worse,traders agree. According to Tim Evans of New York-based IFRPegasus, last week’s forecast degree day accumulations were thehighest for the season to date, so the AGA could report netwithdrawals of 140-160 Bcf in Wednesday’s report, topping the 73Bcf tally from a year ago. “As crazy as this market has been, thewild ride may not be over.”

At last glance, bulls were on the offensive again last night inAccess trading. At 6:30 p.m. (ET) the January contract was 14.7cents higher at $9.56.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.