After gapping higher in Access trading to open Monday’s regular session at $14.900, January natural gas futures spent the rest of the afternoon between $14.470 and $14.930 before settling at $14.841, up 52.9 cents on the session.

Even though current natural gas storage inventories are well above the five-year average, traders are still concerned that prolonged cold could deplete stores quicker than expected, especially with the Gulf of Mexico not yet up to full production capacity following Hurricanes Katrina, Rita and Wilma.

“This was about the quietest 50-cent move I have ever seen,” said Tim Evans, an analyst with IFR Energy Services. “Monday’s move really seemed to have been accomplished on low volume. Trading on Monday was a bit like a football game where there are no lead changes. We really did not change trends or whipsaw during the session; nobody was trying to push it around very much.”

Evans said the $14.195-14.200 area that futures hit on Friday and again in Access is not a bad short-term pivot price. “That is more of a sentiment benchmark,” he said, noting “that the level has taken on more importance because we reached it twice.”

On the upside, Evans said there are a couple of numbers to look at. “The $15.200 level was the open outcry peak, but $15.520 is the Access trading peak. Above those is the $15.600 January life-of-contract high, which was recorded on Oct. 5,” he said. “If we do make a new life-of-contract high for the month, are we going to be able to make a new high with enough momentum to fully confirm that the uptrend is healthy? That is very much in doubt in my opinion.”

Pivotal Midwest energy markets see little slackening from the numbing cold. “The persistent cold spell, now entering its third week, shows little sign of retreat, and several inches of lake-effect snow can be expected in the northwest Indiana and southwest Michigan snow belts, where up to 6 inches of snow fell Sunday” said Tom Skilling, meteorologist with WGNTV.COM in Chicago.

The Weather Channel forecasted a high of 26 for Chicago Monday with the high for the week at 37 on Wednesday. The average high for Chicago this time of year is 38, the forecaster said.

Across a broader stretch of the Midwest, Ohio Valley, and Mid-Atlantic, the National Weather Service (NWS) predicts that for the week ending Dec. 17, the area will endure above-average accumulations of heating degree days (HDD). For New Jersey, New York and Pennsylvania 242 HDD are expected, or 21 more than normal. Wisconsin, Illinois, Indiana, Michigan and Ohio are forecast to shiver under 266 HDD, or 12 more than normal.

Evans said the cold weather really isn’t that much news anymore. “We are adjusting our view based on actual heating degree days last week and the forecast for this week. According to the NWS, the gas home heating customer weighted degree days for this week are estimated to be 201, which is three more than normal and 11 more than last year,” Evans said. “That’s colder than normal, but not by much. Three degrees over the course of a week is one degree colder on three days, which isn’t that remarkable.”

Supportive weather notwithstanding, others see a more fundamental underpinning to the market’s recent strength. “The underlying strength in this (natural gas) market is the fact that our economy is rock solid. The peak in the market after the hurricanes had many energy traders convinced we’d see a period of slow growth. The market sold off on weak seasonal demand and that sell off was exaggerated because of the negativity about the economic outlook,” contended Phil Flynn of Alaron Trading.

He suggests that the decline of the November contract priced in a “worst case scenario” that did not quite develop as many in the market thought. “The market was overdone on the downside and now needs to correct back to the upside, and a market that gets overdone to the downside can also get overdone to the upside,” Flynn cautions. The charts seem to be in “full breakout mode” and the ensuing move up could be significant, he says.

Meanwhile, technical traders are watching the still hefty net short position of non-commercial traders. While the Commodity Futures Trading Commission reported Friday that noncommercial accounts reduced their positions of net short (futures only) contracts substantially for the reporting period ended Dec. 6 from the 50,181 contracts the previous week, they still held 38,883 net short futures contracts. For the period prior to the release of the report, the January contract vaulted from a low of $11.210 posted on Nov. 28 to as high as $13.830 on Dec. 6. Some traders maintain the latest upward price moves were sparked by further attempts by noncommercials to reduce net short positions.

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