Rebounding from last week’s late surge of weakness, December natural gas futures tied on 49.1 cents Monday to close at $7.248 as near-term forecasts began to tilt toward the chilly side. Crude futures increased as well — albeit by a smaller percentage — as the December contract gained $1.37 to finish at $62.41/bbl.

Coincidentally, Monday’s 49.1-cent gain came in one-tenth of a cent shy of erasing last Thursday and Friday’s combined loss of 49.2 cents. Market watchers looking to explain Monday’s rally pointed to the thermometer and near-term forecasts.

“The natural gas market is bouncing back sharply after a Thursday-Friday decline, as the Monday weather outlook is markedly colder than Friday’s projections, with 11-to 15-day temperatures in the Ohio Valley and Mid-Atlantic states looking like they could run 12 to 16 degrees below the norm,” said Tim Evans, an analyst with Citi Futures Perspective in New York City. “Although this looks as though it could just be an early heating season warning shot of cold air, this is just the kind of event that has potential to solidify prospects for a more material seasonal rally. We continue to view $8.00-8.50 as a possible target for such an advance.”

Weather conditions should quicken the step of market bulls. Looking a little more near term, Frontier Weather’s six- to 10-day outlook for Nov. 15-19 called for above-normal temperatures in the West with below-normal conditions in the East.

AccuWeather.com said while the biting west wind Monday was expected to spark lake-effect snow to the lee side of the lower Great Lakes and spread colder conditions across the rest of the Northeast, the forecasting firm doesn’t expect the cold to last. “The latest Pacific storm will spark strong storms on the central and southern Plains Monday, but by midweek, the system could bring showers to the Northeast ahead of warm air that will build back into the region,” said AccuWeather.com’s Steve Penstone. The forecaster predicted that the high in Philadelphia Monday would be 50, four degrees below normal, but by Thursday it is predicted to rise to 54. New York City was expected to see a high Monday of 54, and that is predicted to hold through Thursday.

Further out in its six- to 10-day forecast AccuWeather.com forecasts below-normal temperatures for a vast swath of the country east of a line from North Dakota to northern Florida. Only northernmost New England and southern Florida are seen as normal. In the West, south of an arc from Louisiana to central Idaho to southwest Washington is forecast to be above normal.

Some of the top traders see the market balancing a weak economy, ample supplies and weather conditions that near term are trending to the bearish side of the ledger.

“Supplies are adequate; the U.S. economy is slipping into recession, and there have been few weather-related supply-demand issues,” said Mike DeVooght, president of DEVO Capital, a Colorado trading and consulting firm. He added that near-term weather is a dominant price driver, “but in our opinion, the economy will determine the future direction for the gas market. Once we get to mid-November, every week that goes by without colder-than-normal temperatures is increasing the probability that the gas market will work lower.

“On a trading basis, we will hold current short positions and will view any rally approaching the $8 level as a selling opportunity.” DeVooght currently advises trading accounts and end-users to stand aside and producers and physical market longs to hold a winter 2008 $10 put strip established earlier at 65 cents.

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