Continuing the drop that began last Friday, December natural gas futures on Tuesday shrugged off crude’s latest record run to once again scout the downside of price, recording a low of $7.780 before settling at $7.863, down 13.6 cents from Monday. Since last Thursday’s $8.637 close, the prompt-month contract has dropped 77.4 cents.

“We climbed most of last week and now we are falling this week,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “We are in a trading range. Things seem to be adequately priced for what we know. The cash market is steady and we have some cold air out there, but I also hear that it is November out there, so it is no big surprise. Forecasters are still calling for much-above-normal temperatures for December and January, so I really can’t see any real bullish case that can sustain a rally here.”

As part of the trading range, Kennedy said some minor support appears to be down in the upper $7.70s to lower $7.80s. “However, I don’t think we have hit bedrock support yet,” he said. “I think we may test a little bit lower here. Storage is full, so it is a nonevent. Storage acts as potential supply for December, January and February. When you see these early cold snaps, you start to see the cash market firming up, which is what is going on now. No one is going to pull supply from storage yet.”

The broker added that the disconnect between the cash market and futures is somewhat troubling. “Futures are holding too much of a premium over the cash market,” he said. “Yes, December futures should trade higher than November cash because there is more gas demand in December. That is all well and good, but not $1 or a $1.50 higher than cash. We were trading at way too much of a premium and I think that is slowly coming back into check.”

Some saw the roller-coaster of recent ups and downs as traders adopting a wait-and-see attitude toward the tenuous balance between record storage and shifty early-season weather forecasts. Monday’s 41.9-cent drubbing of the December futures contract was in part caused by a change in extended weather forecasts. Portions of the East previously forecast to be cooler than normal following a near-term blast of Canadian cold were changed to normal.

AccuWeather in its six- to 10-day forecast called for normal temperatures east of a line from northern Michigan to Louisiana and above-normal temperatures west of the line. East of a sinuous line from the Pacific Northwest to western California is forecast to be above normal and west of that line normal.

In its 11- to 15-day forecast AccuWeather predicted above-normal temperatures for a broad expanse of the south-central U.S. encompassing large portions of the southern Plains and Mississippi River Valley. South of a broad arc extending from southern Arizona to South Dakota to Georgia is expected to be above normal but north of that arc is seen as normal, including the Eastern Seaboard and most of the Midwest. The extended Pacific Northwest, including western Montana and northern California, is forecast to be below normal.

The National Oceanic and Atmospheric Administration on Tuesday in its six- to 10-day outlook covering Nov. 12-16 called for a vast majority of the country to be bathed in above-normal temperatures. The Southeast and Northwest are expected to record near-normal readings while Florida and Alaska are scheduled for below-normal conditions, according to the government forecasting agency.

Some traders are taking their cues from an improved technical outlook. “We are forced to concede to an improved chart picture that resulted from last week’s push to 11-week highs,” said Jim Ritterbusch of Ritterbusch and Associates. He said he was conceding an “occasional disconnect from oil” but felt that as long as oil prices kept advancing into record territory, the natural gas market would find it hard to ignore.

After easing on Monday, December crude was back with the bulls again on Tuesday as geopolitical and supply concerns, combined with continued weakness in the U.S. dollar, once again dominated headlines. The contract recorded a new record intraday high of $97.10/bbl before closing out at a record high settle of $96.70/bbl, up $2.72.

Going into Tuesday’s session, short-term natural gas traders said the market was vulnerable to further declines if present price levels did not hold. One New York floor trader said he had expected dips to be bought as long as futures didn’t start “to break under the mid $7.90s.”

With Tuesday’s $7.863 settle, it would appear that ship has already sailed.

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