In a market that was already weakened by technical bearishness, natural gas futures were sent spiraling lower Friday on reports that the El Nino weather pattern will bring above-normal temperatures to the central United States this winter.

A late-morning rally was all bulls could muster Friday, but it proved insignificant when compared to two distinct and prolonged selling surges in the morning and afternoon. The December contract ended on a sour note in its first weekly settle as prompt contract, down 9.6 cents for the day and 12.8 cents for the week.

Speaking at a climate workshop in Kansas City, MO, Thursday, Jim Laver, the head of the NOAA Climate Prediction Center said El Nino will have a visible influence on U.S. weather patterns into early 2003. Specifically, Laver pointed to the High Plains and central U.S. as areas expected to experience a warmer-than-normal winter. “There will still be plenty of winter throughout the central U.S.,” but the impacts of El Nino are likely, he said.

While market-watchers have known that the El Nino weather pattern was reemerging, there had not been a clear consensus among forecasters as to when its impact would begin to take effect. Thursday’s NOAA release served to silence the bulls who have hung their hats on the idea the El Nino pattern would not be strong enough to influence North American weather patterns as early as this winter. Also of negative impact late last week were near-term outlooks that call for moderating temperatures across the western half of the country.

According to the latest six- to 10-day outlook released by the National Weather Service, above-normal temperatures are predicted across the West. Along the eastern seaboard and extending down into the southeastern U.S, below-normal temperatures will be the rule, with seasonal readings expected in the Mississippi and Ohio River Valleys as well as the Midwest, the NWS said.

“I would have to say that the speed of the decline will be a function of the moderation in the weather,” said Tom Saal of Commercial Brokerage Corp in Miami. “You’ve had a fair amount of pre-game hype leading up to this winter and now that the game is about to begin, it is not living up to its billing.” Saal goes on to suggest that the supply-demand equilibrium in October is never a good indicator for November. “For a good part of October, you had heavy seasonal demand from the cold weather competing with storage injections. Not only do you now lose that injection demand, but you also gain withdrawal supply,” he reasoned.

Looking ahead to this Thursday’s storage release, Kyle Cooper of Salomon Smith Barney calls for a withdrawal “somewhere from the single digits to the middle teens.” If he is right, it will starkly contrast with the 20 Bcf injection seen at this time last year and serve to narrow the year-on-year surplus, currently at 40 Bcf.

In daily technicals, support is seen at $4.035 just ahead of declining channel support at $4.029, says Tim Evans of IFR Pegasus in New York. Psychological support exists at an even $4.00. On the upside, Evans sees a cluster of prior lows at $4.217-235 as a further obstacle to a recovery and additional selling in the $4.29-30 area.

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