Despite a bullish seasonal weather forecast released by WSI Corp. on Monday, natural gas futures emerged on the downside from their three days in neutral as the November contract slipped 3.6 cents from Friday’s close to notch a $2.208 settle. One trader said November gas futures likely felt sympathy with crude futures, which after rising 69 cents on Friday, experienced a 15-cent decline Monday to finish at $23.28/bbl on the New York Mercantile Exchange.

Ignoring WSI’s end-of-September update, which showed cooler-than-normal temperatures are expected between now and December along the Pacific Coast and in the eastern half of the country, including Florida, November futures notched a low of $2.140 before rebounding back up to the $2.208 level.

Part of the reason the impact of WSI’s updated forecast (see related story) on the market might have been muted is because it stands at odds with the Sept. 13 forecast put out by the National Oceanic and Atmospheric Administration’s Climate Prediction Center (CPC). WSI’s expectation of below-normal temperatures over much of the East differs from the CPC outlook that calls for near-normal temperatures in those regions. The CPC said it also disagrees with WSI’s California picture. It said it is expecting near-normal temperatures there as well.

Futures price movement continues to be driven by weak fundamentals, said a Gulf Coast risk manager. Technically, Nymex held in about where it was expected to at support of $2.13-14; “the market fell off to that level, but didn’t violate it,” he said. Crude opened down nearly 70 cents, putting downward pressure on gas, he added, but both the crude and gas contracts managed to come back to nearly unchanged at settlement.

One eastern trader advised, “We may test $2.00 at some point, but unless it’s looking like we are going to have a really mild winter, we probably won’t see $1.75.” That’s an outside number, however. “Right now I think we’re close to the bottom. There’s not much more bearish news coming. Right now people are looking at what is happening in the cash market. What people forget is that this is a shoulder month and weaker prices are to be expected. If we get some cold in November, things could turn around quickly. If, on the other hand, we get a real mild November we could test some new lows.

In the near term, Jay Levine of Advest Inc. said there is nothing influencing the futures market right now, other than “overwhelming” bearish fundamentals. “The market’s going nowhere,” Levine commented. “If anywhere, it is going lower and winter is going to be the deciding factor at this point. It is the only thing its got going for it.” He added that the market currently has a “wait and see attitude” until the winter picture unfolds. Until that time, “the market should remain under pressure.” One analyst commented that the cash market suffers a bit from not getting as much screen guidance as it used to due to the later daily Nymex start-ups. However, he said, cash traders are still getting “the value perceptions of EOL [EnronOnline] and ICE [IntercontinentalExchange]; they’re even more of a price determinant than Nymex in its current mode.” That’s because a lot of people are placing their cash gas early each morning “just to grab market share” even before the Nymex kicks in, he explained. For producers, at least at this point, it beats having to shut in a well, the analyst said.

“The first day out of the blocks for October pricing, the cash market fell and NYMEX followed suit,” said Tom Saal of Miami-based Pioneer Futures. The broker said he believes the slight decrease in the futures market was an attempt to make a bid at “converging towards the cash market.”

In anticipation of the American Gas Association’s (AGA) storage report on Wednesday, Levine said his guess is that 81 Bcf was injected into the ground last week, which compares to last year’s injection for the week of 78 Bcf, and 1999’s 62 Bcf injection. The AGA reported last week that 91 Bcf were put in the ground for the week ending Sept. 21, marking a 14 Bcf increase over the year-ago injection.

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