After venturing above the psychological $7 level in Monday morning trade, November natural gas futures slipped lower. Following the lead of petroleum futures, the natural gas prompt month began its descent at 11 a.m. (EDT), settling at $6.806. Despite the drop from the $7.03 high on the day, the prompt month still squeezed out a 9.7-cent increase on the day.

The early rise stumped a number of traders as the NOAA forecast released Sunday pointed to above average or normal temperatures affecting most of the consuming areas in the country over the next six-to-14 days. “NOAA’s forecast seemed to point more to a 30-cent sell-off rather than a 30-cent rise,” a Washington, DC-based broker said.

In NOAA’s six-to-10 day outlook, a majority of the country will experience warmer than normal or normal temperatures, while the West Coast is expected to be colder than normal. In the agency’s 8-14-day model, only parts of the Northwest are expected to be colder than normal.

Some market-watchers pointed to the re-linking of natural gas with petroleum liquids. November crude settled at $53.67/bbl, down $1.26 on the day, while heating oil dropped 3.94 cents to settle at $1.5097/gallon.

“When crude began its break lower, that’s about the time that natural gas lost its push too,” he said. “I didn’t see anything fundamentally out in the news. The liquids weren’t doing anything when gas was having that huge run-up.”

The broker added that he wasn’t sure what caused the big run-up on the chart. “We had a huge range on the day, which, I think, shows that a lot of people are uncertain,” he said. “When you’ve had this huge rally that we had in the face of perhaps record natural gas storage, that gives a lot of people reason to be uncertain. I would still be moderately bullish, but by no means a raging bull.

“This natural gas market is very hard to trade right now,” he added. “How do you justify a short position in light of the strength of the recent bull move? Well, how do you justify a long position in light of the massive amount of gas in storage and the fact that it isn’t snowing in Philadelphia yet? Yes, it might get cold, but you know it might get cold in the winter.”

Looking ahead, the broker said he would look for $6.42 on the low side until it breaks and $7 on the upside. “November looks like it is holding and marking time here on the chart and I tend to believe that it will resolve in the direction of the larger trend, which is still to the upside.”

As for the sell-off in crude, the broker said there was some talk that some refineries were going to be getting back to production after maintenance. “Perhaps some of them came back a little bit early and that was the reason that gasoline and the other liquids really started to weaken,” he said. “However, that has no bearing whatsoever on the natural gas picture that I can see.”

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