After surging to new, two-week highs last Wednesday, the natural gas futures market funneled lower Thursday and Friday as supportive weather forecasts were not enough to overcome the bearish force of a seemingly ample supply situation. After gapping lower 37.2 cents in overnight Access trading to open Friday at $11.570, the prompt month during the regular Friday trading session bounced within a fairly tight 26-cent range before settling at $11.414, down a whopping 52.8 cents for the day and 29.8 cents lower for the week.

If fact, just about the only thing that could stop the selling pressure Friday was a halt in trading. Local traders on the floor received an early lunch break Friday as trading on Nymex was shut down for a 23-minute span due to a data feed going offline. After going dark at 11:36 a.m. EST, trading resumed at 11:59 a.m.

“I heard from the floor that there was a data-feed problem, so they shut it down,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Nymex’s rules state if they can’t disseminate prices, they can’t trade.”

As for the market’s direction, it appeared that traders were still digesting a mix of supportive weather tempered by weakening fundamentals and increasing bearish technical picture. While a swath of cold temperatures came in midweek to blanket the Midwest and Northeast, traders also had to weigh the merits of a sizeable 53 Bcf storage injection report for the week ended Nov. 11.

“I think the market earlier in the week ran itself up on expectations of cold weather,” said Blair. “Now that we have the weather, I think we saw profit-taking on Friday. The other thing is temperatures are expected to moderate in portions of the Northeast a bit over the weekend. Even though it was pretty cold in New York on Thursday and Friday, forecasters are calling for highs in the low 50s again over the weekend.”

The stout injection of 53 Bcf reported Thursday will boost supplies as the industry heads for what may be a very cold winter season. The increase, however, has to be adjusted relative to temperatures in place at the time, and analysts are suggesting that the injection was sizable, even considering the mild temperatures for the week ending Nov. 11.

“In our opinion, on a seasonal temperature adjusted basis, the supply/demand balance is bearish by about 1.0-1.5 Bcf/d,” said Kyle Cooper of Citigroup. He observed that despite the ongoing significant Gulf supply losses, demand losses have exceeded that by about 1.0-1.5 Bcf/d on a seasonal temperature adjusted basis.

That 53 Bcf may come in handy later on. According to AccuWeather.com, the East has entered into a much colder weather pattern, which is likely to stick around through Thanksgiving and probably longer. “The jet stream has shifted, and its new alignment is allowing cold air to come down out of Canada. Through the first half of the month, there was no way that could happen,” the State College, PA-based forecasting firm said. They added that the new front has put an end to 70-degree weather in the East, and 60s may be hard to come by. In addition, the next cold blast that surges into the Midwest and East next week will be even colder than the one that is here now.

Technicians aren’t amused. they see $11.645 as a key zone if the bulls are to regain dominance. However, they are not counting on it to happen. “We see no reason to be optimistic that $11.645 will hold,” said Walter Zimmerman of United Energy. Prior to trading Friday, Zimmerman said that if there was a decisive close below $11.645, the next test would be the $10.390 to $10.300 zone. If $10.30 is breached, he said, it’s “bombs away.”

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.