Despite forecasts that continue to call for above-normal weather into the second half of the month, natural gas futures prices held strong Monday, as fund buying lifted the market off early lows. At the closing bell the January contract finished at $4.359, down 2.4 cents for the session, but well above its low at $4.29.

Traders polled by NGI Monday were impressed by the market’s ability to claw its way off early lows, despite the bearish forecasts handed down by weather forecasters over the weekend. “[Futures] spiked to these levels on forecasts of cold weather, a trader said. “Now those same forecasts call for above-normal weather, yet the market is not losing its premium. Under normal circumstances you’d expect prices to come right back off.”

Corroborating predictions issued last week, the latest round of forecasts call for generally above-normal temperatures across the United States for the next couple weeks. But while above-normal temperatures will serve to melt recent snows in the Mid-Atlantic and across parts of the Midwest, it may not bring about an immediate turn in the pace of storage withdrawals.

A quick look at historical storage data available from the Energy Information Administration shows that last year at this time the market only withdrew 16 Bcf from the ground. Going forward, the comparisons get only marginally better with subsequent weekly draws last year of 43 and 80 Bcf. In considering of temperatures last week in the eastern half of the country that were as much as 9 degrees below normal, prognostications for this Thursday’s storage report are calling for a whopping 120-150 Bcf withdrawal.

Another potentially bullish factor is the recent buying by the funds. According to the latest Commitments of Traders Data issued Friday by the Commodity Futures Trading Commission, non-commercial traders were long 5,506 contracts as of Dec. 3. Not since late October, when January futures topped out at $4.66, has the non-commercial segment of the market held such a large long position. Up until last week, they had remained mostly out of the market since late October, flipping between modest long and short positions.

As long as we are talking about fund traders, it is pertinent to note that January’s low Monday at $4.29 is almost spot on the contract’s 40-day moving average at $4.28. Although it has sent some false signals as of late, the 40-day moving average is generally a good gauge of when to buy or sell the market. Knowing that fund traders use this technical tool so routinely, technical traders will enter in on the long side as a contract passes above its 40-day moving average and short the market as it passes beneath it.

That being said, Tim Evans of IFR Pegasus in New York targets support at $4.29-30, followed by more buying associated with the $4.24-25 level. “Last week’s $4.37 low is something of a make-or-break support beneath that, with failure there knocking the market back toward the $4.00 psychological support or the $3.86 low from mid November,” he wrote in a note to customers Monday.

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