After finishing last week’s trading on a two-day climb, February natural gas futures on Monday returned to the downside with a little help from a faltering crude rally. Prompt-month natural gas reached a low of $8.310 on Monday before settling at $8.574, down 70.6 cents on the day.

“We broke down on Monday, but interestingly enough we are still defending this $8.50 to $8.60 zone,” said a Washington, DC-based broker. “That $8.50 area was our low last week, give or take a few cents, and it appears the market is trying to hold it there. However, given that crude futures were off a majority of the day, I am kind of surprised that we were able to settle above $8.50 on the day.”

Taking over as prompt month, March crude bounced between $67.70/bbl and $68.65/bbl before settling at $68.10/bbl, down 38 cents on the day.

“We were quite busy in natural gas on Monday with buying for marketers,” the broker said. “However, it was a mixed bag. Some large industrial clients were pulling their bids back again thinking they might be able to get 50 cents lower. Other people were fairly active on small strip orders, buying little chunks down in March-April-May all day long. It is a lackluster market, but I think it is still weak.”

Regarding weather outlooks that peg February as a return to cold, the broker said it might be a case of too little too late. “We are running out of days for it to really matter,” he said. “Even if it does get colder, the days are getting longer. Our friend the sun trumps all. While I am not willing to say the winter is dead and over so we can forget about it, I do think if we convincingly break $8.50, we are then looking at $7.85 as a real possibility.”

Last week petroleum prices rose and tugged natural gas futures higher as the markets digested possible sanctions against Iran and the loss of its more than 3 million b/d of production, growing unrest in Nigeria and a new threat from Al-Qaeda.

New additions to the list include explosions which have damaged pipelines in Russia and India. According to MarketWatch, Georgia accused Russia of sabotaging gas pipelines during the weekend after explosions cut off gas supplies to the country. Russia blamed the damage on pro-Chechen rebels. Also, in the Indian state of Assam rebels are suspected of blowing up natural gas and crude oil pipelines in an attack that killed two people and wounded eight others.

Meanwhile, weather forecasts back in the states continue to heckle the bulls. The National Weather Service anticipates that for the week ended Jan. 28 the dominant energy markets of the Mid-Atlantic and Midwest will see below normal accumulations of heating degree days (HDD). For the industrial Midwest states of Ohio, Indiana, Illinois, Michigan and Wisconsin, the HDD tally should reach only 215, or 49 below normal. Pennsylvania, New Jersey and New York are expected to receive only 225 HDD, or 69 below normal.

Large speculators continue to press the short side of the market and appear unmoved by petroleum-related events. The Commodity Futures Trading Commission reported Friday that as of Jan. 17, noncommercials held 50,677 net short (futures only) contracts. This is an increase of 7.9% from the week earlier when the noncommercials held a 46,947 net short (futures only) positions.

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