Bullied by a surprisingly strong blast of winter weather, the natural gas futures market turned abruptly higher Monday as waves of fund and local short covering entered the trading pit. A stronger open set the tone and by 12:30 p.m. EST the January contract had carved out a new six-week continuation-chart high at $5.38.

However, forward looking weather forecasts remain mixed, and that uncertainty was enough to coax traders into profit-taking Monday afternoon. As a result, January failed to match its Nov. 14 spike high at $5.42. It closed at $5.283, up 35.8 cents or 7.3% for the session.

Long weekends always open up the possibility that revised weather forecasts will prompt dramatic move when the market reopens. However in this case, it was not the forecasts that goosed the market higher but the actual weather descending across much of the eastern half of the country. By 9 a.m. Monday, the population centers of Washington, Philadelphia, New York and Boston had seen their high temperatures for the day and snow flurries and sub-freezing temperatures were expected overnight.

The deteriorating weather also cast doubt on forecasts from the National Weather Service, which continues to call for above-normal temperatures for the northeastern quadrant of the country. Traders were quick to recall the poor forecasting performance of the NWS last winter, when below-normal actual readings came in stark contrast to the government’s almost routine calls for normal and above-normal temperatures. However, private forecasters remain mixed on the 2003/04 winter weather outlook. New York-based Weather 2000 looks for wide swings in temperatures this winter, with deep freezes followed by unusual thaws. To cite a few early season examples of these sort of weather anomalies, the group pointed to New York and Houston, which actually broke the freezing mark three weeks to a month earlier this winter compared with last winter.

“As the saying goes, ‘where there’s smoke there’s fire,’ so the ignoring of these sporadic but very anomalous weather events will likely lead to gross miscalculations for the upcoming winter season (which we are already starting to witness this first week of December 2003),” wrote Weather 2000 in a note to customers Monday.

While the weather may want to take natural gas prices on a wild ride this winter, market watchers know that demand only makes up half the picture. To many, storage remains key, and traders are eager to see if last week’s uptick in degree days heating will have an impact on storage draws in the holiday-abbreviated week. Early expectations call for a 20-50 Bcf draw, which would fall in line with the five-year average withdrawal of 29 Bcf, but dramatically short of last year’s 91 Bcf takeaway.

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