In concert with tumbling crude oil prices, natural gas futures cascaded lower in two distinct selling waves Monday as light profit taking enabled the market to fill a key gap left on the daily chart from mid-December. The February contract finished at $4.80, down 22.2 cents for the session. With just 32,305 changing hands, estimated volume was light, especially considering the size of the price move. Natural gas futures will cease trading at 1 p.m. EST Tuesday and re-open with Access trading at 7 p.m. Wednesday.

Natural gas futures finished on a positive note last Friday as expiration-day short-covering overcame bearish storage news. According to the Energy Information Administration, 95 Bcf was pulled from storage during the week ending Dec. 20. Coming on the heels of back-to-back drawdowns of 162 and 159 Bcf, the 95 Bcf takeaway was immediately deemed bearish, However, as is always the case on expiration day, the price direction has less to do with the long-term fundamental outlook and more to do with who is willing to make or take delivery at the prevailing price.

And although January’s $4.988 close may seem pricey to many, it represented enough of a bargain to entice buyers to lift prices higher into the close Friday. It also is fair to note that since notching a $5.53 high on Dec. 12, January futures had been hit by moderate to heavy flows of long liquidation. Short-covering was to be expected on expiration day.

But after taking it on the chin last Friday, bears were back on their feet Monday. In addition to the price-negative storage data, sellers also had free-falling crude oil prices in their arsenal.

After spiking to a new two-year high at $33.65, February crude futures tumbled Monday on the announcement that OPEC would raise production by at least 500,000 b/d in order to keep oil below the $28/bbl threshold. February crude oil dropped 4% on the news, falling $1.35 to close at $31.37 for the session.

Looking ahead at this week’s storage report, which will be released Friday at 10:30 a.m., market watchers are generally calling for a 110-140 Bcf withdrawal, which would fall in line with last year’s 126 Bcf draw. The National Weather Service, meanwhile, continues to look for above normal temperatures in its six- to 10-day forecast. After watching the NWS miss the mark recently with its intermediate-range outlooks, traders may elect to wait until that warmer-than-normal air is at their doorsteps before continuing a downward push.

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