Without any bullish weather even on the horizon, February natural gas picked up the downward trend from the previous week, venturing as low as $9.150 on Monday before closing at $9.360, down 27.2 cents on the day.

After reaching $9.150 late in the session, a rally pushed February natural gas all of the way up to $9.390 before settling Monday. The $9.360 close is the lowest a prompt month has settled since Aug. 19, 2005, when the September 2005 contract closed at $9.111.

“While Monday was still a down day, there was a little rebound in the afternoon,” said a Washington, DC-based broker. “We saw some decent buying from end-user customers getting long. I think that sort of came in along with some short-covering at the end of the day to produce the rally.

“In Monday’s action, the prompt month was able to rally off of its low, but I wouldn’t make too much of it yet,” he said. “For the moment, I would classify it as a short-covering bounce that will likely be met with more selling in the not too distant future.”

The broker noted that $9.00 is not only a psychological support level, but it is also a technical support level as well. “It is a relative midpoint of a band between $8.63 and $9.30, which was the high and low of the zone that February traded from mid-June through the end of July,” he said. “So that is pretty solid support. Below $9-even is $8.63, followed by $7.88, which could be a possible terminus.”

The broker noted that the weather picture continues to remain bearish. “While some forecasts are looking for the cold to return sometime, no one seems to know when that is,” he said. “Until we see some significant change in the weather, we’re not going to see any kind of legitimate bullish move.”

The National Weather Service (NWS) predicts this week will see below average accumulations of heating degree days (HDD) across populous energy markets. For the Mid-Atlantic states of New York, New Jersey, and Pennsylvania, the NWS forecasts that for the week ended Jan. 14 a total of 168 HDD, or 93 less than normal. The states of Ohio, Indiana,. Michigan, Illinois and Wisconsin are expected to bask in a relatively balmy 195 HDD, or a whopping 101 less than normal.

Interestingly, traders and risk managers who use the HDD contracts offered by the Chicago Mercantile Exchange are anticipating a mild January as well. The January HDD Chicago contract settled Friday at 1,095 HDD, unchanged from Thursday. According to AccuWeather, Chicago experienced 1,288 HDD in January 2005. The contracts are traded electronically on the CME Globex system.

Beleaguered bulls can take some heart in the fact that the economy appears strong and may ultimately lay a foundation for increased natural gas demand. The Federal Reserve Board last Monday indicated in minutes of its December meeting that additional interest-rate increases needed to restrain inflation “probably would not be large.”

Last week reports on economic activity were consistent with the Fed’s confidence in the economy. The Labor Department said Friday that 108,000 jobs were added last month and 90,000 more were created in November than originally reported, bringing the two-month average to about 200,000. The unemployment rate fell to 4.9% from 5%. Factory orders increased for a second straight month in November, rising 2.5%, as airlines ordered more planes and businesses rebuilt after the Gulf Coast hurricanes. The gain was the biggest since August, the Commerce Department said.

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