After trading lower for the first half of the day Friday on the New York Mercantile Exchange, November natural gas futures rallied in the afternoon to settle at $7.241, up 10.9 cents on the day and a stunning $1.582 higher than the previous week’s close.

After notching a low of $6.980 just after noon EDT, the prompt month rallied to put in a $7.300 high for the session before settlement. The November contract continued its march higher despite the fact that the country’s natural gas storage levels — sitting at 3,442 Bcf as of Oct. 13 — are fast approaching the all-time record of 3,472 Bcf, which was recorded at the end of November 1990.

“Obviously, none of this move higher was fundamental,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Even though there are concerns of some cold weather coming in, I really think this recent move higher was very technical in nature. We had some pretty major resistance levels up in the $6.80s and then around $6.94. When we got up there and stayed above them, I think that set the stage for the rally. I think our next resistance numbers are up around $7.50. From what I have heard, there has been a little bit of fund buying going on, but nothing really spectacular.”

The picture for the 2006-2007 winter remained muddled late in the week as the National Oceanic and Atmospheric Administration (NOAA) reiterated on Thursday that it expects this winter to be warmer than the 30-year norm (see related story). NOAA’s forecast remains at odds with the forecast released by AccuWeather meteorologist Joe Bastardi, who said he expects winter to be colder than normal along the high-energy-demand East Coast and eastern Gulf Coast, while warmer than normal conditions will be found from the western Great Lakes to the Pacific Northwest.

Regarding the conflicting forecasts, Blair said it was too early to focus on that aspect of the market. “The middle of October is too early to be hanging your hat on forecasts for winter weather,” he said. “Focusing on those forecasts just yet, I think, is a little bit premature here. No matter how you look at it, we are 30 Bcf away from the largest natural gas storage level we have ever had.”

Blair said he expected the market to explore a little higher. “I think we’ve got a little more room to the upside before we see some resistance, unless of course we walk in this week and find substantially cold weather in a lot of areas in the Midcontinent and the Northeast. If we do get significant cold, then I think it unlocks even more room to the upside.”

Like Blair, floor traders continue to focus on the near-term weather picture. “The story I am hearing is that the weather is going to move everything higher,” said a New York floor trader. “It’s the same story that has been going on all week.”

According to AccuWeather, another shot of cold is on its way. “The dam is about to break, folks, and there is nothing we can do about it other than tell you that colder weather is coming,” said AccuWeather meteorologist John Kocet. “This latest surge of cold air will follow on the heels of a storm racing across the central states. In any case, cold air will rush across the Great Plains and Midwest this weekend, reaching the eastern Great Lakes by the end of Sunday. The turn to colder weather will spread all the way to the Eastern Seaboard early [this] week. This will not be a record-setter, but the difference will be quite noticeable, especially where mild weather prevails first.” He said the largest temperature drops will occur from the central and southern Plains eastward.

Prior to Friday’s trade, Commercial Brokerage Corp.’s Tom Saal called the price action on the day. “Buyers, be ready,” Saal warned as he suggested scale-down buying when the November contract traded between $6.990 and $6.880.

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