Natural gas traders were unimpressed with the weekend arrival of Tropical Storm Ida in the Gulf of Mexico and it showed in trading on Monday as the December contract traded back and forth during the day before closing the regular session at $4.670, up 7.5 cents from Friday’s finish.

After reaching a low of $4.473 in early morning trade, the contract engaged in mini rallies followed by mini sell-offs before notching a high of $4.690 just prior to the close of the regular session. Crude futures traders were a little more decisive. The December contract ran up from an early morning low of $77.95/bbl to a high of $80.19/bbl before closing at $79.43/bbl, up $2 from Friday’s close.

While Ida was receiving a lot of ink from the press for the high winds and drenching rains that were expected to swamp the Gulf Coast and for the precautionary measures that were being taken by producers (see related story), traders were largely unimpressed.

“From everyone I’ve talked to, nobody really cares about Ida. It really is a nonevent,” said a Washington, DC-based broker. “Yes, some gas is being shut in, but if there were to be a major disruption in the Gulf, there is plenty of gas shut in onshore that could be tapped pretty quickly. If I’m a producer, I wouldn’t mind a little bit of temporary support from this storm, but I really don’t think Ida will even get that.”

The broker noted that the natural gas market is still pretty “wishy-washy,” which stands in stark contrast to the organized strength in crude futures. “Crude was very strong on Monday; the U.S. dollar got clobbered again and the stock market looks like it is going to keep the Dow over 10,000 by a good amount. Everything appeared to be rip roaring, except for natural gas.”

He noted that the big question out there is what the impact will be of producers scaling back operations. “A lot of the producers in their third quarter earnings calls were talking about their strategies of reducing operations. While the production declines are showing up, the rate is a lot slower than many expected,” the broker told NGI. “As the prices rise, producers will be tempted to bring some things back online, so we’ll have to see how that all plays out as well.”

Looking at support and resistance lines, the broker said critical support comes in around $4.250 while major resistance sits at $5.200. “Basically, we’ve got about a dollar band that is really of interest.”

Some analysts were taking a close look at Friday’s significant market weakness. “There was more selling last week than we can chalk up to the normal once- or twice-a-week reaction to record-high underground storage figures,” said Peter Beutel of Cameron Hanover, a Connecticut-based energy consulting firm. Beutel largely discounts the high level of storage as a market driver and says it “can hardly be considered a surprise. Still, we have seen more selling recently, and we tend to see in it the general reassessment of the economy that has been an ongoing argument for the last few weeks. It seems that Friday’s selling reflected some of the uncertainty injected into a number of markets by the October employment figures.”

The Commodity Futures Trading Commission released Commitments of Traders figures Friday showing that funds and managed accounts continued to favor the short side of the market, but the overall open interest tally suggests that the protracted decline in prices may end at some point. For the week ended Nov. 3 the managed money category held 130,555 contracts long and 167,922 contracts short. Long positions increased by 3,618 and short holdings grew by 1,224. For the five trading days ended Nov. 3 December natural gas futures fell 36 cents to $4.922. Overall open interest decreased by 32,245 contracts to 890,681, a dynamic that signals long liquidation, and likely the eventual emergence of interest in the long side of the market, traders say.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.