Buoyed by waves of short-covering, the natural gas futures market turned higher Friday as traders alleviated oversold conditions and took back a portion of last week’s considerable losses.

The December contract received the biggest buying boost, surging 18.3 cents on the day to close at $4.893. It was still down for the week, however, 16 cents below the previous Friday’s close of $5.053.

After watching as prices dumped lower in the two previous Friday trading sessions, market watchers were hesitant to bet against further softness heading into the trading day. As it turns out, however, the market could not repeat itself a third time and once the momentum had turned to the upside, the buying came in droves. The December contract carved out a 30-cent trading range Friday, bouncing easily off its $4.64 low to notch a $4.94 top by just after 11 a.m. EST.

Though fund traders are sometimes wrongly accused as the market segment responsible for short-covering, that allegation was backed with hard evidence Friday. According to the latest Commitments of Traders Report released Friday, the non-commercial segment of the market was short 42,722 as of Oct. 28, up more than 14,000 short positions from the week prior. According to NGI’s historical archive of the data collected by the Commodity Futures Trading Commission, these speculative accounts have not held such a large net short position since February of 2002 — when prices sank to a low of $1.85.

“Sure [the non-commercials] could get shorter,” said Steve Blair of Rafferty Technical Research in New York. “But why would they want to right before winter?… This market is just waiting for some weather.” Blair went on to suggest that at least part of Friday’s short-covering was attributable to an area of storminess in the Atlantic that forecasters believe poses an outside chance of finding its way into the Gulf of Mexico. “The market was looking for a reason to rally [Friday],” he added.

Looking ahead, Blair believes that a higher open in either Sunday evening’s Access session or Monday morning’s open outcry session could produce enough follow-through buying to fill in December’s chart gap up to $5.04. “However, any more gains will be predicated on fundamentals and the weather.” He noted that a prominent private forecasting group sees no below-normal temperatures for the Midwest and Northeast until December at the earliest.

That prediction was corroborated on Friday by the latest from the National Weather Service, which calls for above-normal temperatures in the eastern half of the country through at least Nov. 10. Below-normal temperatures are forecast for the western United States during the same period, and traders are eager to see if that cooler weather is predicted to move east by the middle of the month. The NWS releases an updated six- to 10-day forecast at about 3 p.m. EST each day.

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