Despite the gains in the nearby crude oil pit and ahead of the coldest air expected thus far this season, natural gas futures tumbled lower Friday as weak longs headed for the exits ahead of the weekend and the December expiry Tuesday.

After an initial surge failed to elicit much follow-through buying, prices sifted lower throughout the morning. At $4.26, the December contract settled with 9.1-cent loss for the session. However, on a weekly basis the close was positive, as it easily exceeded last Friday’s $3.981 mark. Estimated volume was weak with just 68,359 contracts changing hands.

While it is not uncommon for the natural gas futures market to sink lower ahead of the weekend, several traders were surprised gas prices were able to fall amid the combination of rising crude oil futures and cold weather forecasts. January crude finished near new three-week highs, up 41 cents at $26.76 Friday, as traders continued to buy into the idea that OPEC will rein in overproduction in an attempt to maintain its $22-28 target range.

There was no temperature moderation Friday in the latest weather forecast maps, which now call for below-normal temperatures for the most of the eastern two-thirds of the country through Dec. 6. However, traders realize that those forecasts can change abruptly over a weekend and that was enough to prompt many of them to take some money off the table Friday. “What we saw early last week was the weak shorts exiting the market,” said Tom Saal of Commercial Brokerage Corp. in Miami. “Then on Friday we saw some of the weak length getting out of their positions. I would expect to see a little more of that come [this week],” he said.

Another factor which may come into play this week is weakening cash prices, as many industrial plants curtail or shut-down entirely operations over the holiday weekend. Many believe cash prices will begin to converge downward with December futures as early as Monday.

One market-moving factor that traders will have to be without this week is the Energy Information Administration Storage Report, which will be released between 4:30 and 4:40 EST Wednesday, 2 hours after Nymex will have shut down for the holiday weekend. And while it is difficult to know how the futures market will react without its favorite supply data, its recent history of going into the doldrums on Wednesdays (before the report) suggest it might not do too much. However, Thursdays have been anything but dull and traders have used the storage data of the last few weeks to post some considerable price moves.

Last week the market reacted to a smaller-than-expected 1 Bcf withdrawal with a 9.7-cent advance Friday. A week earlier, the market vacillated within a 20-cent trading range amid waves of short-covering and long liquidation brought on by a larger-than-expected 48 Bcf withdrawal. Looking ahead, early expectations for this Wednesday’s release are centered on a 20-45 Bcf drawdown.

Although of diminished importance heading into expiration, December technicals could also come into play this week. Most chartists agree the market will attempt to break beneath support at the $4.20 level early this week. If successful, bears could gain a straight path to the bottom of the Nov. 15-18 chart gap down to $4.03. On the upside, resistance is not as clearly defined. Thursday’s high at $4.40 is certainly a candidate for a top, with more selling expected at previous highs of $4.44 and $4.53.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.