Taking their cue from weakness on the petroleum side as well as a sigh of relief regarding Hurricane Ophelia’s path, October natural gas futures on Monday explored lower, breaking below $11 at one point before settling at $11.031, down 23.2 cents on the day.

At its lowest, prompt month natural gas was trading at $10.78 in morning activity. After trolling in the sub-$11 area for most of the session, October climbed to put in a high of $11.20 before settling.

The petroleum futures complex continued its recent flash of weakness on Monday, recording price decreases across the board. October crude settled at $63.34/bbl, down 74 cents on the day. October unleaded gasoline finished 8.60 cents lower at $1.8737/gallon, while October heating oil closed 8.22 cents lower at $1.8143/gallon.

The Minerals Management Service reported Saturday that cumulative natural gas shut-in still stood at 3.8 Bcf/d, unchanged from Friday’s rate. On Monday, things weren’t much better. The agency reported that the shut-in level went down slightly to 3.784 Bcf/d (see related story).

According to analysts, beginning storage inventories for the winter heating season are now at risk, and the pricing of winter delivery months is now adjusting upward.

“The lost production is well ahead of last year when Hurricane Ivan disrupted supply,” noted Jim Ritterbusch of Ritterbusch and Associates. He contended that because of the lost production, “it is looking increasingly likely that the fall peak in storage at around the beginning of November will fall short of 3,100 Bcf, a significant deficit compared to last year’s approximate 3,300 Bcf peak supply.”

He added that concerns over the potential need for high prices to ration available winter supply during the upcoming heavy usage period is beginning to lend significant support to the winter contracts in relation to the front months, but nearby futures are being pressured by a softening in spot values with cash prices finishing last week at the $11.00 level. On Monday, October natural gas futures settled $1.402 lower than the January 2006 contract, which closed at $12.433 on the day, down 18.5 cents.

Pressure on the cash market notwithstanding, the bulls may be in better shape than they expect. AccuWeather predicts that for the next five days warmer-than-normal temperatures will prevail over a broad expanse of the U.S. from Wyoming to Maine and southern New Mexico to Georgia. Only California is forecast to see below-normal temperatures.

The Commodity Futures Trading Commission said Friday that noncommercials held a net short (futures only) 8,604 contracts as of Sept. 6. This is a slight contraction of the 9,196 net short position held a week earlier.

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