November natural gas futures vaulted higher Monday as traders observed a continuation of the short covering that sent futures bounding higher by 25.2 cents on Friday. The prompt-month contract rose 26.9 cents Monday to close at $4.987 and December advanced 20.1 cents to $5.723. November crude oil rose 46 cents to $70.41/bbl.

November natural gas made a couple of short jaunts north of $5 during Monday’s regular session. The contract reached $5.008 in morning trade and maxed out at $5.002 twice in afternoon trade before the regular session’s close.

“We had some short covering on Friday and some more Monday, and it looks like the market is headed to $5.25,” said a New York floor trader. He added that it was “amazing” the difference between the spot November contract close to $5 and Henry Hub prompt gas which settled Monday at $2.89. “Something has to give,” he said, echoing a common cry with this large of a spread (see related story).

“I think the [futures] market opens a little higher Tuesday, traders try to run it up some more and I am looking for $5.25 to $5.30.”

Others see $5 as pivotal. “Five dollars is technical resistance on some weekly and monthly charts. If the market shows the ability to stay above $5 for the next few days, then we may be going on to $5.25. I think if it gets to $5.25, then we have a chance at a pretty good correction,” said an Oklahoma banker.

Followers of Elliott Wave methodology suggest that recent market strength may still continue. Prior to the open Walter Zimmerman of United Energy was looking for $5.565 as an objective last week and said “even if $2.409 is a major long-term low, we would expect corrective action from a first test of the vicinity of the $5.565 area. Last week rallied to a $4.975 high before retreating. However, last week’s retreat held our most bullish case support into the $4.370 to $4.320 zone, so a further advance into a test of $5.565 cannot be ruled out.”

The day’s rise may not be entirely founded on short covering and technical factors. Weather forecasts call for below normal temperatures in the six- to 10-day period. “Cold high pressure originating in the upper latitudes will progress southward along through the Midcontinent. This will provide unseasonably cold conditions from the Rockies to the Midwest as the period progresses,” said forecaster MDA EarthSat. It noted that low temperatures in both Minneapolis and Chicago are expected to fall to freezing, elevating heating demand. The East will also turn cooler by mid to late period, with marginal much belows in place by days nine and 10.

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