Despite an attempt in morning trade, November natural gas futures on Monday were unable to retrace the mammoth gains recorded last week. The prompt month settled at $6.725, down only 4.7 cents from Friday’s close.

After heading lower in morning trade, futures bounced off of support at the $6.62 level at 11:32 a.m. (EDT). From there, the contract worked its way back up for the remainder of the trading session.

The remainder of the winter strip all recorded gains on the day, with January breaking through the psychological $8 level before settling just below.

Labeling the day as “very quiet,” Rafferty Technical Research’s Steve Blair said it appeared as if November tried to get down and break through the lows from Friday, but was unable to do it. “I think that it may have had a lot to do with the lack of players in the market,” he said. “The whole floor was quiet Monday. There was nothing going on.” Trading was light as only 44,633 contracts changed hands.

Commenting on last week’s sizeable run up, Blair said he believes that natural gas futures are being driven a lot by funds. “Looking at the [Commitments of Traders] report, the funds are now net long in natural gas,” he said. Blair added that the funds went from a net short of about 25,500 in the Sept. 21 report to a net long of a little over 1,500 for the Sept. 28 report. The big change was a liquidation of shorts. They went from a gross short position of a little over 59,000 to a gross short of almost 32,500.

“I am not sure whether that continued fund activity is a function of a continuation of the liquidation of short positions, or, some of these guys may be putting on some length. I am not sure which it is,” he said.

Reacting to the notion that natural gas may have re-hitched its wagon to crude futures, Blair said, “I think a lot of this move is a function of the funds, and it may just simply be because the funds are also pretty long on the petroleum side. The funds have definitely been buyers in all of the markets, so I think the connection between natural gas and the petroleum complex is more a function of price than fundamentals.”

Shut-ins due to Hurricane Ivan could still be impacting prices as well. The Minerals Management Service reported Monday that 1.98 Bcf/d still remains off-line in the Gulf of Mexico, not including production lost due to destroyed platforms. The shut-in number is only a slight improvement from Friday’s level, which was 2.3 Bcf/d. The cumulative shut-in amount now stands at 66.1 Bcf.

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