With the December contract’s expiration rally on Monday already a mere memory, January natural gas futures on Tuesday plunged lower as traders weighed cold winter forecasts against the healthy natural gas storage situation. The newly minted front month put in a low on the day of $6.347 before closing the regular session at $6.386, down 44.1 cents from Monday’s close.

Traders were not overly impressed with Monday’s jump in futures value. “Despite Monday’s rally, it is hard right now to say definitively that we have put in a bottom,” said Ed Kennedy of Hencorp Becstone Futures LC. The prompt-month bottom for the move of $5.990 was set on Oct. 27.

“In the intermediate to long term, I think we are headed higher, but that does not mean we might not dip lower again in the short term as we wait for these forecasts of a cold December and cold winter to materialize,” the broker said. “It is a case of distant contemplation versus direct confrontation. There are forecasts out there calling for a repeat of the December of 1989 when it failed to break above freezing in New York for almost an entire month. However, with supply as plentiful as it is, the market needs to actually see those chilly temperatures before reacting,” he said, distinguishing the difference between “contemplation” of the forecast and “confrontation” of the actual weather.

In any event, Kennedy looks for continued price volatility and is advising his clients to use options and swaps to help manage this risk. However, he warns that price volatility is not the only risk lurking out there. “Especially right now with what is going on with the financial turmoil, you need to be especially concerned with counterparty credit risk. Don’t put all you eggs in one basket,” he advised.

Kennedy and his Hencorp Becstone colleague Tom Saal will address counterparty credit risk and other pertinent and timely topics facing gas traders at their upcoming Hedging and Trading Workshop: Where’s the Market Going and What Can I Do About it? The workshop is being held in the Trump International in Miami on Dec. 8-9. Also joining them to discuss current market dynamics are Al Bean, a partner with ACT Energy Management and Bert Kalisch, CEO of the American Public Gas Association. Slots are filling fast, and the registration and hotel deadline is next week. Visit https://workshops.gasmart.com for more information.

Meanwhile, front-month crude futures continued to crumble as the global economic concern placed doubt on demand levels going forward. After trading at an all-time high of $147.27/bbl in early July, front-month crude is currently trading at nearly a third of that price level. On Tuesday, January crude closed at $50.77/bbl, down $3.73 from Monday’s close.

The Energy Information Administration (EIA) is releasing its natural gas storage report for the week ending Nov. 21 one day early due to the holiday-shortened week. The report will go live on Wednesday at noon EST instead of its normal 10:35 a.m. EST release on Thursday.

Traders and analysts are expecting to see the first withdrawal of the season. A Reuters survey of 18 industry players produced a range of withdrawal estimates from 5 Bcf to 68 Bcf with an average pull expectation of 44 Bcf.

The number revealed Wednesday will be compared with last year’s 7 Bcf withdrawal for the week and a five-year average pull of 13 Bcf.

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