After pushing a few pennies higher in low-volume trading on Friday, the upward momentum appeared to run out heading into Monday’s regular session as the January natural gas contract plummeted back below $5. The prompt-month contract reached a low of $4.823 before closing out the day at $4.848, down 34.4 cents from Friday’s finish.

“I think late last week’s 42.6-cent run-up to $5.192, while a lot of market participants were on holiday, wasn’t supportable…especially when you consider the current fundamental picture — i.e., lots of gas and no real cold,” said a New York broker. “Once everyone got back to work Monday I think the ship was righted.”

Citi Futures Perspective analyst Tim Evans noted that the natural gas futures market — like many markets — is currently facing the “flight or switch” decision as prices “weakened” on Monday. However, he noted near-term weather forecasts that could offer the bulls at least some ammo.

“The six- to 10 and 11- to 15-day forecasts still look moderately supportive, but the gas-weighted heating degree day accumulations for this week look well below the five-year average level, making cash market weakness an issue,” he said. “Record storage levels leave natural gas dependent on cold for any upside potential and vulnerable on the downside during any warm spells. This also means the market is vulnerable to some sideways chop if the weather forecasts oscillate from cooler to warmer and back again in the days ahead.”

Heading into Monday’s trading some technical analysts saw the market continuing to struggle to maintain what little upward momentum it had; “$5.146 has been the level to breach on a closing basis since the January contract rolled into the spot position,” said Brian LaRose, an analyst with United Energy.

LaRose maintained that Friday’s holiday-thinned settlement at $5.192 was not quite strong enough. “While we have seen this level broken interday, we have not seen a decisive settlement above this critical point of resistance. Clear this hurdle to start the week and $5.955 would be the minimum implied objective,” he said in a morning note to clients.

On a fundamental note, others saw Friday’s small gain as signifying market strength. “The fact that the [storage] surpluses, against both a year ago and against the five-year average, increased last week and was overwhelmed by the economic news speaks volumes,” said Peter Beutel, president of Cameron Hanover, a Connecticut-based energy consulting firm. “Technically, a decisive break above $5.318 would give us a swing objective up to $7.066/MMBtu. We already have objectives to the $5.90s, but we need a breakout over $5.32 first. Last week was bullish.”

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