Trading on technical factors and influence from the liquid hydrocarbons, December natural gas futures explored lower on Tuesday. The prompt month notched a low on the day of $8.46 before settling at $8.567, down 15.3 cents on the session.

December crude on Tuesday settled down 51 cents at $49.62/bbl, which marks the first time the contract has closed below $50 since Oct. 4.

“I think a lot of the perception out there is that if Bush wins, he’ll continue to fill the Strategic Petroleum Reserve. If Kerry wins — and prices are still high — the belief is he’ll stop filling the Strategic Petroleum Reserve,” said Steve Blair of Rafferty Technical Research in New York. “People seem to believe that there is a several-dollar premium in the market based on Bush taking these barrels off of the market and putting them in the SPR. I don’t know how true that really is, but that is the perception.”

On the natural gas front, Blair said, “it looks as if the natural gas futures market is coming down on technical factors. In addition, it appears to really be shadowing heating oil futures.”

He noted that a heating oil drop Tuesday morning stifled a December natural gas rally. “Gas did not fail immediately, but the rally ended when heating oil started coming off.” December heating oil finished the day down 1.54 cents at $1.3922/gallon.

“December natural gas came very close to support levels at $8.44 and we bounced off of there,” he said. “At least for the time being, I think we may have seen a top. I believe that we will test support again at the $8.44 level and then again at $8.38.”

Looking at the natural gas storage report, which will be released at its normal time Thursday morning, Blair said he believes natural gas production returning from shut-ins in the Gulf of Mexico (GOM) could boost the injection. “Returning production may not help this week’s report as much as it will next week’s as those shut-ins become less and less,” he said.

The Minerals Management Service reported Tuesday that natural gas shut-ins in the Gulf are down to 752.88 MMcf/d, which is 6.12% of the GOM’s normal daily output. For the period from Sept. 11 to Nov. 2, the MMS reported that 111.012 Bcf has been shut in, which is equivalent to 2.495% of the yearly production of gas in the GOM.

IFR Energy Services’ Tim Evans said that while the natural gas market has held together much firmer over the past week than the petroleum complex has, it “appears to be vulnerable to a similar kind of sell-off.” He added that storage injections for the week ended Oct. 29 could be in the 30-40 Bcf range as heating degree day accumulations for last week were a step lower from the prior period, when 26 Bcf was put into storage.

“Production from the Gulf of Mexico has been recovering and it may not be easy to locate a storage home for that additional output here in the short run,” Evans said. “It also restores a bit more peak deliverability to the market for the full winter ahead.”

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