Despite the near-record level of natural gas in underground storage, December natural gas futures maintained Friday’s momentum to push higher on Monday as the contract gained 5.5 cents to close at $6.838. The move was especially peculiar because crude futures — which have been recently aligned with natural gas — saw the December contract drop $3.90 on the day to close at $63.91/bbl.

“I’m not sure exactly what the natural gas market is doing here. We had the big rally late in the day on Friday, and we finished a few cents higher here on Monday,” said Tom Saal, a broker with Hencorp Becstone Futures LC. “I have to think that a lot of this is fund short-covering. Friday’s Commitments of Traders report showed the funds are still very net short, even with a record amount of declining positions. I think they are trying to sneak out of Dodge here.”

Looking at trading strategies in the current market, Saal said, “I think right now you have to bet the weather forecast. If we get some chilly weather as predicted this weekend, things might begin to pick up even more. This could be the beginning of an up move. We have resistance up at $7, but all of the chart watchers are looking at $7.330 as a crucial resistance line.”

Other market watchers are not so sure that a new move higher has begun. Citi Futures Perspective analyst Tim Evans sees natural gas futures as “back on the defensive, with the latest temperature outlook featuring warmer-than-normal temperatures for much of the continental U.S. in the Nov. 13-17 period. Our quick read on the projected heating degree days yields a possible minor net injection to storage for the week ending Nov. 14, extending the injection season a week beyond its normal conclusion. We continue to see the natural gas market as somewhat undervalued and with potential for a seasonal rally, but the near-term temperature outlook continues to resist uptrend development.”

Weather bulls may have to be patient. Forecasts call for warm temperatures in the near term followed by significantly cooler temperatures later on. “Temps will run around 3-8 [degrees] above average across the eastern two-thirds of the U.S. through the first half of next week, with readings across the north-central U.S. running as much as 8-15 degrees above average early this week,” said meteorologist John Dee. For the week beginning Nov. 10 “temps in the central U.S. will then fall to around 1-5 [degrees] below average by the end of the week, while temps in the eastern U.S. remain around 3-8 [degrees] above average. The western U.S. will see temps run around 1-5 [degrees] below average early this week and then warm to around average levels by the end of the week.”

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