Fueled by moderating weather forecasts and following Monday’s21-cent decline, natural gas futures tumbled lower in a classicexpiration-day long liquidation Tuesday, as traders rolled theirprompt month positions into back months. After a back-breakingsell-off in the last five minutes of trading Monday, the Decembercontract gapped lower at the open and tumbled 35.2 cents to itsfinal resting place at $6.016 yesterday.

Looking back at the price action over the last couple of days,Nymex local Ira Hochman was quick to point to December’s inabilityto nudge past its all-time high at $6.62 set last Wednesday asevidence the market was in trouble. And while January was able topost a fresh high at $6.68 Monday, it ultimately fell Tuesday insympathy with December. “Although you want to trade January becauseit’s a truer month, you can’t ignore the prompt month entirely.December never took out last Wednesday’s high. This was a case, notof what the market did, but of what the market didn’t do,” Hochmansaid. January finished the day at $6.207, down 26.6 cents on theday and 37.7 cents for the week. By comparison, December plummeteda whopping 56.1 cents over the same two-day period.

Another factor that traders will need to take into account isthe announcement by Nymex that it will be raising margins on itsHenry Hub natural gas contract at the close of business Wednesdayto $7,500 from $6,500 for clearing members; $8,250 from $7,150 formembers; and $10,125 from $8,775 for customers. For Ed Kennedy ofMiami-based Pioneer Futures, that means more blood on bears’ coatsthan on bulls’ hides following the market’s correction over thelast couple of days.

Also of impact will be the release of fresh storage data by theAmerican Gas Association this afternoon. Preliminary expectationsare centered on a net withdrawal of 90-110 Bcf. Last year at thistime the market actually injected 5 Bcf, but analysts are quick torecognize the fact that last week was much colder than last week ayear ago. According to Salomon Smith Barney, storage was likelydecreased by 100-110 Bcf for the week ending Nov. 24. During thatperiod, temperatures (as expressed by degree days heating) were78.9% colder than last year and 37.8% colder than 10-year average.

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