Capitalizing on Tuesday’s downward momentum, December natural gas futures dropped another 30 cents Wednesday to close at $6.405 as rumors swirled that longs were getting squeezed out of their positions.

Once again much of the focus in energy commodities was on crude futures, where the December contract recorded a low of $55.62/bbl before closing at $56.16/bbl, down a mere $91.65/bbl from the all-time record front-month high of $147.27/bbl set four short months ago. In addition, Wednesday’s $55.62/bbl low was the lowest a front month has been since Jan. 30, 2007.

Focusing on natural gas, some market watchers said it appeared that traders were getting tired of waiting for cold weather to arrive. “Using Market Profile, the last couple of days of value declines look like long liquidation,” said Tom Saal, a broker with Hencorp Becstone Futures LC. “It is what we call a 3-2-1 Down teardrop kind of pattern on the charts. People who are long are getting out of their length by selling it because the winter weather has not shown up yet and they are probably getting hefty margin calls.”

Saal said he believes there could be some more room to the downside, but the low from late October is likely to hold. “The old bottom set on Oct. 27 is $5.990, so we could test that. I think that number will hold as support, but it is hard to say with all of the financial uncertainty. We are faced with an unprecedented situation where we could face a significant recession. We don’t know how long it is going to last or how deep it is going to be. I think those kind of fears are in most of the commodities right now.”

Analysts suggested that Tuesday’s 54.3-cent free fall was in part due to the Veterans Day banking holiday. The argument goes that without the participation of banks, a significant buttress to major market moves had been removed. “I think for the most part it’s true that hedge funds had more leverage Tuesday than they would have otherwise. I would also think that helped exaggerate the price move as well,” said a Texas analyst.

As for market direction, the analyst said that at this time of year the market was “hypersensitive” to weather news, particularly bullish news. “It got overdone one way [Monday’s 49.1-cent advance] and then overdone the other way.”

Updates to the six- to 10-day forecast appear to be moving in the direction of cooler temperatures. “Most of the changes were in the colder direction across much of the central and eastern U.S. The cold is seen in two pushes, with some brief moderation in between,” said Matt Rogers in an MDA EarthSat Wednesday morning update. He added that there was a chance of some temperature moderation east of the Mississippi, but “most of the risk here is in the colder direction with much-below-normal temperatures a distinct possibility back into the Plains and for more of the Midwest and South.”

In addition to the lack of cold so far, the current natural gas storage situation has not been offering market bulls any kind of support either. With 3.4 Tcf of gas underground, traders know that it will take a mighty cold winter to put stress on supplies. Storage is expected to be even more full this week, but traders and analysts will have to wait an additional day to find out by just how much. The Energy Information Administration’s report for the week ended Nov. 7 will be released at 10:35 a.m. EST on Friday instead of its normal Thursday slot due to the Veterans Day holiday on Tuesday.

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