Following the long holiday weekend, traders on Monday wasted virtually no time getting their positions across as the December natural gas futures contract plummeted on its final day. After burrowing below the $11.030 support level (from Nov. 7) to record a trade at $10.880 just before 1:30 p.m. EST, the expiring prompt month rallied to go off the board at $11.180, down 44 cents for the day.

The $11.180 settle was the lowest close for December since the pre-Hurricane Katrina rally close on Aug. 26 of $10.641. The high on that day in August was $10.850.

January natural gas, which took over front-month honors in Monday evening Access trading, reached a low of $11.210 in trading on Monday before closing at $11.634, down 41.6 cents for the day. The settle was also the lowest close for January since just before the Hurricane Katrina rally. On Aug. 26, January natural gas reached a low of $10.830 before closing at $10.926.

“The December and January contracts were two separate stories Monday,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “In December, we started with long liquidation in the late morning, which was expected because it was expiration day. I was curious as to whether the shorts were going to scale-in buydowns as the longs were getting out, but I guess they didn’t. I think they ended up staying too long at the fair. We had a good rally in the December contract on the last half hour close. On the other hand, January was under a lot of pressure from fund selling in the morning and through the early afternoon.”

As for the let-up in cold in the East, the broker said the industry knew it was coming last week. “It’s a very short break before we go into the deep freeze starting on Thursday,” he said. “The independent forecasters are saying that when the real cold comes in it is going to be much colder than the [Global Forecast System] is saying and it is going to stay around through December. That could change the whole equation, but then again, have you ever known a long range forecast to be wrong?” Kennedy quipped.

Commenting on the fact that the December contract was able to penetrate below the $11.030 support that has held for some time, Kennedy said he wasn’t all that impressed. “The jury is still out on whether or not important technical levels have been breached on a closing basis. Obviously, on an intra-day basis, the answer is yes, but on a closing basis, we didn’t stay below that level.” said Monday that a new zonal flow later this week would split the U.S. into three cross sections from West to East. The northern states across the country would see very cold weather, while the middle swath would see chilly temperatures and the southern band would see mild conditions.

“The result of this pattern will be to divide the coldest air across the north from a band of mild air across south,” said. “This type of pattern also helps to speed up storm systems. One storm will race across the Midwest and Mid-Atlantic states Thursday and may combine with low pressure developing off the East Coast to form a late-week storm off the New England coast Thursday night into Friday. Out West, another storm will move in off the central Pacific Thursday, bringing rain to Northern California and Oregon before moving into the northern Rockies.”

However, the National Weather Service’s (NWS) view differs somewhat. For the week ending Dec. 3, the NWS said populous energy markets of the Mid-Atlantic and Midwest will experience below-normal accumulations of heating degree days (HDD). New York, New Jersey and Pennsylvania are forecast to experience 146 HDD, or 44 below normal, while Ohio, Indiana, Michigan, Illinois and Wisconsin will receive 197 HDD, or 20 fewer than normal, it said.

As for the natural gas futures market receiving supportive news from the petroleum complex, no such help was coming Monday. Last week, there was speculation that OPEC would announce oil production cuts at its next meeting Dec. 12 in Kuwait (see Daily GPI, Nov. 23). However, according to reports on Monday, Saudi oil minister Ali Naimi said he thinks the oil market is “beautiful” right now, suggesting he will be in no great hurry to change production quotas, said Tim Evans, an analyst with IFR Energy Services.

The news, compounded with cooler current temperatures, was reflected in the petroleum futures complex Monday as January crude dropped $1.35 to settle at $57.36/bbl. Likewise, December unleaded gasoline and December heating oil closed lower by 3.94 cents and 5.36 cents, respectively, at $1.4182/gallon and $1.6356/gallon.

“The current break in East Coast temperatures is helping to pressure the price of heating fuels, including both the heating oil market and natural gas,” said Evans. “We continue to see large downside risk for both these markets, which need early season cold in order to maintain their price premiums.”

What was expected to be a supportive environment from the petroleum sector may not materialize. According to a Bloomberg survey of 35 analysts taken last week, crude oil was expected to trade near $59 a barrel this week. Thirteen, or 37%, said oil prices would be little changed, 12, or 34%, said prices would rise and 10, or 29%, predicted a decline.

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