After gapping lower for the second-straight session, natural gas futures shuffled sideways within a very tight range Thursday as buyers and sellers were just about evenly matched. However, the price damage that had been done in the overnight access session was undeniable and that weakness proved enough to propel December prices to new 31-month lows at $2.52 shortly after the opening bell yesterday. The contract finished at $2.551, down 12.5 cents for the session and nearly 25 cents beneath Tuesday’s $2.80 close. Heavy estimated volume of 85,193 punctuated the bears’ statement.

Traders agreed that yesterday’s price erosion was a result of a continued lack of anything remotely positive on the demand outlook. While slightly cooler temperatures are expected across portions of the East next week, traders admit that next Wednesday’s storage report will be tough for bulls to swallow.

However, if you don’t like the weather, or in this case the weather forecast, all you have to do is “wait a minute,” because it will change. According to the latest 30- to 90-day weather outlook released after trading concluded yesterday afternoon by the National Oceanic and Atmospheric Administration, colder than usual temperatures are expected for much of the northern tier of the country, while warmer-than-usual mercury readings will be seen across the South. This forecast represents a slight departure from the reports released last month by private forecaster Jon Davis of Salomon Smith Barney calling for this winter to be “near or at the top 33% of the coldest winters in the last 106 years (see Daily GPI, Oct. 17). A graphical representation of the NOAA report is available at https://www.cpc.ncep.noaa.gov/products/predictions/90day/

Looking ahead at today’s session, traders agree that the market will likely be tested to the downside early. If the market sustains the initial push to the downside, then a short-covering rally ahead of the weekend is possible, considering the oversold conditions that exist. However, if the market breaks below $2.50, it could trigger sell stops that were strategically placed several cents below the $2.535 low from Oct. 1. In that event, selling could pressure the market down to the Fibonacci retracement projections at $2.40.

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