Stemming two months of slow, downward price momentum, the natural gas market turned abruptly higher Monday as traders received a one-two weather combination punch. In addition to the first blast of cool weather descending on parts of the Northeast over the weekend, the futures market was bullied higher by longer-range forecasts calling for below-normal temperatures this winter in the East. With that the November 2003 contract made its debut as prompt month in ostentatious fashion, gapping higher at the opening bell and advancing 27.4 cents to close at $4.895.

“It was up, up and away,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “The cold air arrived just as the forecasts for below-normal temperatures for this winter. There was lots of news out there [Monday] and none of it good if you are a bear.”

Following on the heels of winter outlooks released by Salomon Smith Barney last Monday (see Daily GPI, Sept 24), and the Farmer’s Almanac last month (see Daily GPI Aug. 26), Accuweather joined the bulls with its prediction for another winter of below-normal temperatures in the key heating regions of the North and East. “Coldest and snowiest [weather] in relation to normal [will be] in New England, the eastern Great Lakes and the mid-Atlantic states, wrote head Accuweather forecaster Joe Bastardi in a note to clients late Friday.

Specifically, Bastardi looks for a near or above normal autumn for those areas to change briskly into a below-normal temperature outlook for December, which he expects will be the coldest month this winter in relation to average.

Providing this weather forecast plays out, there exists plenty of fuel for the market to move higher, continues Kennedy. “The non-commercials were even shorter as of the last Commitments of Traders Report. As we move closer to the 40-day moving average, there will be the tendency for them to cover their shorts. We have some real upside potential here.

Kennedy may have a point. According to the latest Commitments of Traders Report, non-commercial traders were net short nearly 40,000 positions as of last Tuesday. Looking back at the history of COT data, these ‘speculators’ have been a good barometer of overall price movements as they sell into price weakness and buy a market moving higher. Because these funds have only been shorter than 40,000 at one other time in the 11-year history of COT data (Jan 02), market watchers fear that a short-covering rally and even higher prices is imminent heading into winter.

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