Buoyed by the one-two combination of cold weather forecasts and a pipeline rupture in Illinois, natural gas futures ascended rapidly Monday as traders let emotion rule the trading session. After peaking at a new contract high of $5.81, the March contract came within striking distance of the 23-month prompt month high of $5.85 set Jan. 23 by the February contract. March closed at $5.766 Monday, up 16.1 cents for the session.

Traders were mixed Monday as to whether the price run-up was in reaction to the weather forecasts or the pipeline rupture. First reported Sunday evening, the “outage” on ANR’s 24-inch Southwest Mainline did not have an impact on futures prices until after physical prices started skyrocketing yesterday morning. While one report had a trader suggesting the outage would take a whopping 1 Bcf of gas off the market, most reports called the outage minor. ANR did not anticipate any service interruptions.

However, traders did not miss the opportunity to press prices higher. ANR SW prices led the advance Monday, averaging $5.43 for the day, up 41 cents from the weekend.

Also impacting traders’ decisions Monday were revised forecasts calling for another surge of Arctic air this week into the eastern half of the country. After basking in temperatures as much as 9 degrees above normal over the weekend, major eastern population centers can expect a rapid cool-down this week, wrote Salomon Smith Barney meteorologists Jon Davis and Mark Russo in a note to customers Monday. “There will be two separate Arctic air masses which will be moving down into the eastern U.S. The first will move initially into the central U.S. early this week and make it to the East Coast by the middle of the week. The second will flow into the central U.S. over the weekend and then into the eastern U.S. early next week.”

And while the blast of Arctic air will mean temperatures 3-5 degrees below normal, it will not come close to the bitterly cold temperatures those areas experienced during the last three weeks of January. One of the main reasons for this, added Davis and Russo, is that portions of the Midwest and South England will lack the snow cover they had during January. “Many of these areas, which during the middle of January had numerous mornings when low temps dropped below zero, will have lows mainly in the teens with a few single digits in the far northern sections of this area.”

In daily technicals, the case can be made for either higher or lower prices going forward. While Monday’s $5.81 high was very supportive on a March chart, it was less than impressive on a daily continuation chart because it fell short of February’s $5.85 peak. Should the market fail to ascend to resistance there Tuesday, technicians look for a sell-off to alleviate overbought conditions. On the downside, March has uptrend support in conjunction with Monday’s low at $5.485. A break lower could result in a quick move down to $5.39 or even the $5.28 low from last Monday.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.