December natural gas futures Tuesday broke rank with the oil complex and gained ground. Traders cited near-term supportive weather forecasts as aiding the bullish cause but cautioned against any sustained advance. November futures rose 4.7 cents to settle at $8.021, and December gained 5.5 cents to finish at $8.354. December crude oil swan-dived $3.15 to $90.38/bbl.

“I think prices may be just continuing to trade within their range,” said Eric Wittenauer, an energy analyst with AG Edwards in St. Louis. He added that the eight- to 14-day temperature forecast looks seasonally cold, and that offered some support to the December contract.

“Around the 18th of October December futures hit a high of $8.245, and it will be interesting to see if the contract can test those highs. But since storage is so high I anticipate a pullback from those highs, and at the end of the week the storage injection should establish a new record. That would be bearish as well.” EIA data show that working gas inventories currently stand at 3,443 Bcf and just 15 Bcf are needed to surpass the record 3,458 Bcf set Oct. 19, 2006.

Wittenauer said that even if the December contract took out the October high of $8.245 established on Oct. 18, a new market trend higher was not likely. “That would not necessarily mean that December futures are set to advance further, it would most likely redefine the trading range.” December futures have been locked in a broad trading range from a low of $7.240 established on Sept. 7 to the recent Oct. 18 high.

Savvy traders like Wittenauer always have a point at which they are willing to break stride and change their outlook. “I think you would have to see something in the way of (colder) temperatures. There would have to be an early, cold start to the winter, and it would come down to what temperatures do, or how cold it might get early in the season. If there is a good cold spell and we take off some of the excess supply, that would get people doing the math and trying to determine how much is left at the end of the heating season,” he said.

“Technical support for the December contract is between $7.45 and $7.50, although the contract has traded down to $7.240,” he observed.

Other analysts also see limited near-term upside for the December futures. “With December becoming the spot contract at a 60-cent premium, natural gas may be testing the first level of our resistance zone at $8.070,” said Walter Zimmerman of United Energy. In the short run, Zimmerman said, his wave count suggests that December futures may have put in a peak, but “our intermediate outlook is for more upside later this week. Target a push toward $8.950 to finish the wave count advance from late August,” he said in a note to clients. Zimmerman’s estimate of near-term resistance is $8.070 and $8.225.

Regarding the recent tendency for crude oil and natural gas prices to advance and decline in tandem, Wittenauer says they “certainly don’t need to move together, for from a fundamental standpoint the markets are different. Strength in crude oil will not be enough to sustain a rally in natural gas. It will require supportive weather.”

The National Weather Service eight- to 14-day forecast shows below-normal temperatures east of a line from northern Minnesota to West Texas. Only Maine is spared. West of a line from northern Montana to southwest New Mexico temperatures are forecast to be above normal.

The National Hurricane Center (NHC) reported that as of 2 p.m. EDT Tropical Storm Noel was located about 275 miles south of Nassau, Bahamas. It was moving to the west at 8 mph and was sporting 40 mph winds. If NHC projections are correct, Noel will turn to the north and finally the northeast before making a path towards Bermuda.

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