In sympathy with firmer crude oil prices and in reaction to constructive weather forecasts, prompt month natural gas futures rebounded off early lows Monday to post a fifth-straight daily advance. The January contract gained 5.7 cents to $5.341 and the February contract notched a 6.2-cent rise to $5.297.

Meanwhile, March rounded out the winter strip with a 3.2-cent addition to $4.967. The summer strip, however, fared poorly by comparison, as losses were incurred in the April 03 contract through the remainder of the out months.

Several sources polled by NGI Monday pointed to rising crude oil prices as a supportive factor for natural gas. January crude advanced $1.66 to $30.10 Monday on concerns that the Venezuelan strike will continue to cut into oil production.

Also of impact were governmental weather forecasts, which corroborate private forecasts last week calling for a return to normal and below-normal temperatures for the eastern U.S. by the New Year. According to the latest six- to 10-day forecast released Monday by the National Weather Service, cold air from Canada will dip back into the western half of the country during the Dec. 22-26 period. By Dec. 30, the NWS expects that cold front to push east, bringing temperatures back down to normal or sub-normal mercury readings for the last days of the year.

However, traders were not focused solely on the weather Monday. Of greater potential impact, market watchers agree, is this week’s storage report to be released Thursday by the Energy Information Administration. By looking at last week’s temperature data available from 12 selected cities, Thomas Driscoll of Lehman Brothers in New York estimates that 125 Bcf was pulled from the ground during the week ending Dec. 13. This estimate includes a 2.6 Bcf/d allowance, which Driscoll believes is necessary to bring his weather normalized withdrawal estimate in line with the strong pace of storage withdrawals this season.

Meanwhile, citing heating degree day accumulations across the country that were greater last week than had been forecast, Tim Evans of IFR Pegasus in New York looks for a 110-120 Bcf withdrawal, down from last week’s reported 162 bcf pull, but still well above both last year’s 43 Bcf takeaway and the 90 Bcf five-year average. Looking ahead, Evans believes the current spate of milder weather could pave the way for bearish storage figures. “The weather prospects for this week and next suggest somewhat lower withdrawals on warmer than normal readings. The holidays also provide the market a breather from industrial demand, allowing prices a chance to correct to the downside,” he wrote in a note to customers Monday.

However, looking ahead, Evans believes that any move lower will be short-lived and suggests traders use buy stops to take advantage of the lower prices. “In the absence of a dramatic fundamental disappointment here, the market’s choice is between a short, sharp pullback in the next day or two, or a more protracted distribution phase before an intermediate-term correction could be organized,” he continued. Support exists at Monday’s session low at $5.17, followed by the psychologically important $5.00 level. On the upside, recent highs at $5.44 and $5.53 are potential resistance. A break higher could pave the way for a run to the $5.71 spot month high from March 2001.

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