November futures rose Friday as prices continued to consolidate in a broad trading range and traders attempted to get an idea of what winter weather will bring. Traders also lightened up on short positions prior to the weekend and elected to not carry any extended positions when unanticipated weather events such as hurricanes may impact the market.

Although tropical activity continues to diminish, discretion is often the better part of valor. A buoyant petroleum market also aided the bulls cause as spot crude oil futures traded to $84.05, a record, before settling at $83.69, up 61 cents. November natural gas futures rose 9.8 cents to $6.974 and the December contract added 4 cents to $7.681.

Longer term weather uncertainty and the tail end of hurricane season appear able to balance abundant supplies.

“Currently natural gas futures are in a consolidation phase,” said Eric Wittenauer, an analyst with AG Edwards in St. Louis. He noted that the rangebound market has been in place for a significant period of time, and it’s likely the two schools of thought of bullish tropical developments pitted against plump storage inventories kept prices confined to a “relatively tight 70-cent range between $6.80 and $7.50.”

Tropical weather is still in play. AccuWeather is following Tropical Depression 15, located about 940 miles east of Bermuda and packing all of 30 mph winds. But, according to meteorologist Rob Miller, “further weakening is expected.” In addition to TD 15, a low-pressure system over Belize and a tropical wave at 66W and 17N are being monitored, but neither is considered a threat to Gulf of Mexico activity at this time.

On Thursday the Energy Information Administration reported gas storage injections of 73 Bcf, bringing working gas inventories to 3,336 Bcf. Injections continue on pace to exceed the record 3,452 Bcf injected by the end of October 2006. The figure was somewhat higher than the 68 Bcf expected by analysts surveyed by Dow Jones, and November futures shed 13.4 cents to settle at $6.876.

“It’s my view that the November contract before it goes off the board [Oct. 29] will come under additional pressure if temperatures don’t give it any support. A pullback to $6.20 would not be surprising,” said Wittenauer. He went on to say that over the long term prices will depend on what temperatures look like, and if there is a cold, early start to winter prices are likely to advance. “Once the winter weather becomes more clear, the impact of La Nina is better understood and demand is in better focus, there’s the potential for prices to pull back significantly,” he said.

Others are also mulling a price retreat. “We viewed Thursday’s narrowing of about 5 Bcf in the deficit against last year as the beginning of a trend that should restore the surplus within the next few weeks,” said Jim Ritterbusch of Ritterbusch and Associates. He noted that last year storage peaked early on Oct. 19. “In contrast, the lack of a foreseeable storm threat combined with forecasts for generally mild temperatures extending out to later this month would appear to set the stage for further storage injections on into next month, a scenario similar to two years ago when supply failed to peak until the second week of November.”

Comparisons with two years ago are difficult because supply factors were overwhelmed by the devastation caused by Hurricane Katrina. November 2005 futures reached a peak of $14.750 on Oct. 15, fell to $12.680 on Oct. 21 and expired at $13.832 on Oct. 27. Spot natural gas futures did, however, go on to record a record $15.780 on Dec. 13, 2005.

Although $15.78 is probably not in the cards this year, Wittenauer thinks “there is the possibility of a $1.50 to $2 rise in natural gas prices if there is a cold snap that picks up demand early on. “It would be ideal for the bulls for a mid-November cold spell and drop in inventory levels against the seasonal averages. It could also support prices into December. Cold always comes, it’s a matter of when.”

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