After trading higher in Nymex’s overnight Access session, November natural gas on Tuesday continued to rebound from its recent dip. Fears surrounding continued shut-ins, tied together with concerns about the impending winter, pushed the prompt month higher on the day to settle at $13.519, up 54.4 cents from Monday.

After opening Tuesday at $13.23, a full 25.5 cents higher than Monday’s regular session close, November natural gas scouted higher for the remainder of the session, never dropping below $13.22, which was notched in the first minutes of trading. The prompt month shot higher in the last half hour of the session to reach a high of $13.59, before easing slightly to close.

The Minerals Management Service reported Tuesday that 6.042 Bcf/d is still shut in in the Gulf of Mexico in Hurricanes Katrina’s and Rita’s aftermath. That’s down from Friday’s report of 6.441 Bcf/d in shut-ins. The Gulf’s daily production normally averages about 10 Bcf.

“Over the past few days, the volume hasn’t been that stellar on this bounce,” said Brad Florer, a broker with ICAP Energy. “Tuesday’s spike is just more evidence that there are not any real sellers out there right now. I think that is the bottom line. The pullback over the last three days after making contract highs was really nice. Everyone was screaming reversal, but it only took less than a day to erase half of what they took out.

“I think that is due to the fact that there is no follow-through. Once the longs who want out ring the register, there is nobody out there to pick up the ball and keep running,” he said. “Everyone is concerned about winter around the corner. Everyone is still worried about the remaining shut-ins in the Gulf as well.”

The natural gas futures market did appear to take into account AccuWeather.com’s Winter Forecast released by senior meteorologist Joe Bastardi on Monday (see related story).

Florer said that Bastardi’s forecast Monday could also still be impacting the market a day later. “He’s calling for some cold out there and I definitely think that played a factor at the end of the day Monday and once again on Tuesday,” he said. “The winter forecasts will continue to dribble out one at a time as we get closer to winter and I think you will see the market react to each one of them. The key factor is how cold is it going to be this winter and whether or not production will be able to keep up with demand. Storage is not going to be that big of an issue because it will probably begin the winter around the five-year average, it’s just a matter of how cold a winter it will be and how much production remains shut in.”

Florer added that the bulls still appear to be firmly in charge at this point. “If you’re a bear, I think you have to continue to hope for demand destruction and the possibility that people will turn their thermostats down after their first bill at the end of November,” he said. “I think the fear factor remains in the hands of the bulls. A more rational view would be for people to realize things aren’t that bad and slam the market back under $10, but that isn’t where the fear is right now. You can feel that the shorts and the bears just have no stomach for it right now.”

Calling the price action Tuesday, Tom Saal of Commercial Brokerage, said Tuesday morning he expected the market to trade higher. Saal uses Market Profile in his forecasting, and his studies show a large area of “negative development” in the $13.50 area of the November futures Market Profile chart. A textbook Market Profile depicts prices forming a statistical bell-shaped curve, and the November profile shows a large area of that bell-shaped curve that has failed to develop, thus the term “negative development.”

According to the Market Profile methodology, prices will gravitate to areas of negative development. The November price action over the last month, from a low of $12.150 to a high of $14.775, forms the minimum and maximum of the distribution, according to Saal.

Other analysts were also predicting the increase Tuesday. “We are viewing the sell-off of last week as corrective as long as November holds above $13,” said Jim Ritterbusch of Ritterbusch and Associates. He expected prices to remain strong this month, but form a top by next month ahead of the winter heating season.

“While a cold winter represents a major hazard to such a forecast, we feel that within the current environment, the market will price in a worst-case situation, such as an exceptionally cold December-February period and that prices will soften regardless,” he said.

Weather conditions, however, do not appear to support the bull’s case. AccuWeather predicts that for the next five days temperatures across the entire country with the exception of northwest Washington and western Oregon will be above normal.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.