Despite an overwhelming preponderance of bearish fundamental information available Friday, natural gas futures traders played it safe, electing to gently cover shorts on the off chance that weather forecasts would offer a bullish surprise when trading resumed Sunday evening and Monday morning.

Just about the only price-supportive factor for gas futures was the nearby crude oil market, which advanced 59 cents and notched a new three-week high at $31.14/bbl.

December natural gas closed at $4.706, up 4.8 cents for the day, but down 18.7 cents for the week — its fourth straight weekly decline. At 61,237, volume at the exchange was light on Friday.

Several traders were surprised by the market’s modest upturn just a day after sellers punished prices to the tune of 23.9 cents following Thursday’s bearish storage report. Though the 34 Bcf estimated injection by the Energy Information Administration fell short of the 37-52 Bcf range of market expectations, it was enough to propel storage levels above 2002 levels. According to the EIA, the surplus to last year now stands at 10 Bcf and the surplus to the five-year average is now 95 Bcf.

But storage was not the only price-negative factor last week. The weather forecasts calling for mostly above normal temperatures this week gave traders little incentive to bid the market higher. However, traders have been burned by a situation like this in the past: warm weather forecasts on Friday giving way to cool weather forecasts Monday morning.

“This market has absorbed quite a bit of bearish fundamental information without breaking,” offered Steve Blair of Rafferty Technical Research in New York. “I would be cautious about getting short down here…we know how quickly things can turn around on revised forecasts.”

Technically speaking, the market is in a position to rebound, analysts agree. December has notched lows between $4.63 and $4.66 in five of the last seven trading sessions, forming what some traders would describe as a bottoming formation. The rationale is a little different but the conclusion the same upon inspection of the daily continuation chart, which shows a potential double bottom formation comprised of the $4.39 and $4.40 lows notched Sept. 22 and Oct. 29 respectively, adds Blair.

Craig Coberly of GSC Energy in Atlanta is also cautiously bullish at current levels, but wants to see a move above $5.04 before wholeheartedly endorsing the buy side. “Trading below $4.63 would clearly say price trends were still down, but additional downside would probably be limited to the quarter cent per day rising Gann support line,” he says, pointing to the $4.58-59 support area.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.