November natural gas futures retreated after November crude oil futures came off of an all-time high Tuesday as traders sensed the day’s high price in the prompt-month natural gas contract may represent a near-term peak. November natural gas fell 7.8 cents to settle at $7.367.

At about 12 p.m. EDT the rise in crude oil futures ceased and took natural gas prices lower. November crude oil careened off an all-time high of $88.20/bbl before closing at a record settle of $87.61/bbl, up $1.48 from Monday. Natural gas traders admit only a nominal physical link to the oil markets but find the volatility is hard to ignore.

“Crude oil fell out of bed, and natural gas followed,” said a New York floor trader. He added that the market has been very erratic and moving very quickly. “I’m thinking that $7.50 is a pretty good top area, and I look for the market to trade down to $7.20 Wednesday and then wait for the inventory numbers.”

The early read on Thursday’s Energy Information Administration injection report is for a build of 54 Bcf, the median of nine analysts polled by Bloomberg.

“Crude oil does not look like it is putting on the brakes just yet, and as long as the international threat remains, energy users will look for alternative sources and bid up those prices,” said a Washington, DC, broker analyst. He added that natural gas all year has been “breathtakingly cheap” relative to liquids, and although the petroleum complex may not be a driver, “it does give some support and a November chart shows every time natural gas has tried to work lower, it has stalled.”

Oil markets the last two days have rocketed higher on concerns that Turkey may attack Kurdish militants in Iraq and disrupt oil shipments. According to a Bloomberg report, Turkish Prime Minister Recep Tayyip Erdogan said he expects the country’s parliament will approve tomorrow a possible military incursion into Iraq, which holds the world’s third-largest reserves. Actual physical disruptions may be limited, however, because shipments of oil from northern Iraq to Turkey’s Mediterranean Sea facilities have been cut for most of the time since the U.S. invasion of Iraq in 2003 because of attacks on pipelines, the report noted.

Natural gas traders may want to take a look across the trading floor Wednesday to see if the weekly petroleum supply figures may affect natural gas. “A rise in petroleum prices may just spill over and take natural gas higher, but natural gas has been in a trading range for a long time from $6.80 to $7.40, and the big question is whether it can break out,” the broker said. Ritterbusch and Associates believes that any decline in crude oil supplies would be viewed by the oil market as bullish.

Soaring crude oil prices aside, near-term temperatures in key eastern markets do not support a bullish natural gas price outlook. The National Weather Service (NWS) reported below-normal accumulations of heating degree days (HDD) for last week, and forecasts more of the same for the week ended Oct. 20. Last week New York, New Jersey and Pennsylvania tallied 37 HDD, or 40 fewer than normal, and the industrialized Midwest states of Ohio, Indiana, Michigan, Illinois and Wisconsin recorded 65 HDD, or 15 fewer than normal. This week the NWS forecasts 46 HDD for the Mid-Atlantic states, or 47 fewer than normal, and 39 HDD, or a whopping 59 HDD fewer than normal, for the Midwest.

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