Futures traders were unable to maintain upward momentum earlyyesterday after an initial push above the 40-day moving average toa high of $2.715. January futures fell back sharply in the morningand then traded sideways throughout the rest of the day to end down2.6 cents at $2.629. February lost 1.7 cents to settle at $2.609.The 12-month strip only lost eight-tenths of a cent.

Despite the slight set-back, Susannah Hardesty of EnergyResearch and Trading Inc., said she still believes there is plentyof strength for futures to regain at least two-thirds of the groundit lost this fall. “Just a temporary set-back; between now and theexpiration of this contract we could much higher. My upside targetis somewhere between $2.90 and $3.05.” She bases that mainly oncurrent short-term weather forecasts, which show colder than normaltemperatures for the large midwestern and eastern consuming regionsthrough the end of the year.

Hardesty said another bullish indicator came out of lastFriday’s Commitment of Traders report by the Commodity FuturesTrading Commission. The report, which measures futures marketpositions, showed the commercial sector net short. Hardesty saidshe is expecting commercial buying activity to be up substantiallythis bidweek compared to last. “During the last bidweek, a lot ofthe trade buyers under-nominated their baseload gas, which meantthey had to buy a lot more in the swing market, and that hurt.” Shenoted Henry Hub spot prices have risen steadily all month. Inaddition, she said weather forecasts would be even more influentialthis bidweek, and currently they look pretty bullish.

Nevertheless, Tim Evans of Thompson Global Markets believes thelong-term weather and storage picture are decidedly bearish andshould take some of the wind out the market’s sails as it crossesthe halfway point between its late fall bottom and its early-fallpeak. There currently is a 276 Bcf working gas surplus compared towhat is normal for this time of year, according to American GasAssociation storage data. And the NWS long-term weather forecastfor January calls for above normal temperatures for nearly theentire bottom two-thirds of the nation.

“The much below normal temperatures forecast for the East Coastnext week may generate a further push to the upside, but eventuallythese episodes normally create a’buy-the-forecast-sell-the-weather’ effect that will leave themarket overvalued by the time the cold actually arrives,” saidEvans. “Warmer temperatures in the Plains will also temper the urgeto push higher…”

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