After December futures gave back 34.7 cents on Thursday, bearish traders looking to capitalize on the momentum on Halloween felt more tricked than treated. Whether it was a result of bearish weather fundamentals weakening or just traders playing the recent range, the front-month contract ended up closing at $6.783 on Friday, up 35.2 cents from Thursday and 32.1 cents higher than the previous week’s close.

“The natural gas market has been steadied by the latest weather updates showing less bearish conditions in the 11- to 15-day outlook than in our prior forecasts,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “We note the natural gas prices also continue to perform somewhat better than crude oil, reflecting a more neutral fundamental data set and some potential for a seasonal rally. However, some more serious fourth quarter cold might be needed to cinch the deal.”

According to Frontier Weather’s 11- to 15-day forecast, most of the United States will have normal temperatures for the season. Below-normal temperatures in the northern Plains and Upper Midwest and above-normal temperatures in Texas and Louisiana will be the chief exceptions, the forecasting firm said.

Some market watchers were not convinced that weather forecasts were the reason for Friday’s jump. “All of the energies had the same profile Friday. They were chopping around in a range, then punched through the morning highs, which triggered follow-on buying,” said a Washington, DC-based broker. “In many cases we saw the combination of the two ways to play it. Some people were seeing natural gas bouncing around in a range and are trying to buy the low and sell the high. If they were smart, when we got close to the top of the range, they sold and put a buy stop above the market.

“The other strategy is to not do anything until it breaks out of the current range in one direction or the other, so they might have bought buy stops above and below the market. When we moved higher, those stops all triggered. There did not seem to be really any fundamental news out there to spark this move. Yes, the stock market was up, but it was not up that much when futures closed. Friday was just traders trading, so I don’t think the bump up really had anything to do with anything real in the market.”

Market bulls are looking for lower production levels to sustain prices. “We look for a continued loss of roughly a third of offshore Gulf of Mexico production and the possibility of onshore output cuts to support levels at around the $6 mark,” said Jim Ritterbusch of Ritterbusch and Associates. He added that on the bearish side of the ledger weather “still looks deserving of a negative check mark, at least over the next two-week period. The market has also been forced to disgorge some storm premium as the hurricane season winds down.”

If recent unsupportive weather or healthy storage levels were not enough, natural gas bulls have had to buck the headwind of a softening economy, if not one that is already in recession. Although at this time of year natural gas demand is primarily a function of residential and commercial heating demand, the government reported Thursday that Real gross domestic product suffered a decline of 0.3%. The good news is that it is somewhat better than analyst expectations of a 0.5% fall.

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