Feeding off last Thursday’s late sell-off, natural gas futurestumbled lower yesterday as traders liquidated January positionsahead of the contract’s expiration Tuesday. After gapping lower atthe open, January dropped below key support levels at $2.38-39 and$2.32-34 en route to its $2.271 settlement. Including yesterday’s12.8-cent decline, the January contract has plummeted 45 cents fromMonday’s $2.715 high of a week ago.

While a few traders pointed to market-on-close (MOC) orders thatcreated a flurry of activity amid an otherwise light tradingsession, others were focused on the latest word from both privateand governmental weather forecasters.

Ed Kennedy of Miami-based Pioneer Futures contends MOC sellorders, placed by over-the-counter dealers in an attempt toreplicate the last 3-day settle, had an undeniable bearish impacton the market. But while trading saw heavy MOC selling lastThursday and yesterday, Kennedy isn’t necessarily convinced themarket will experience a similar dip today. “It gets a little morecomplicated on the last day, he warned. Whereas you have had mainlyOTC dealers Thursday and [Monday], you will have producers,marketers, and end-users in the mix [Tuesday].”

Another potential bullish concern, Kennedy feels may have abigger effect on the February contract than on January, is revisedweather forecasts calling for a return of the cold air much of thecountry experienced this past weekend. According to their latestsix- to 10-day forecast, the National Weather Service (NWS) callsfor below-normal temperatures over the almost the entire northernhalf of the country and normal temperatures for the middlelatitudes from the Mid-Atlantic extending across to Arizona. ForKennedy however, the most important feature in the new NWS outlookis the small dollop of much-below normal temperatures expected forMontana and North Dakota. And although the northern plains do notconstitute a key gas-consuming area, he believes the report isfriendly to bulls because it corroborates with some of the notableindependent forecasters calling for another Arctic blast of coldair for the Midwest by the middle of next week.

Initially the market seemed to buy it as prices were up5.4-cents to $2.325 in after-hours Access trading.

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