November natural gas futures expired on a strong note Monday as traders observed not only a soaring crude oil market, but also a late-season emergence of tropical weather. November futures settled at $7.269, up 5.1 cents, and the now front-month December contract finished at $7.974, up a stout 16.6 cents. December crude oil gained $1.67 to a record close of $93.53/bbl.

“Crude oil has certainly helped support the natural gas. Last week November settled at $6.891 and now it is up to $7.269, so just as crude oil made its gains of $4 to $5 natural gas has followed right along,” said a New York floor trader.

He added that the massive short position held by funds and managed accounts would continue to cover shorts “and some of that looked like it happened today. It looks like the beginnings of a pretty good rally.” Tropical Storm Noel had little impact on trading, but “that will certainly add support to the rally argument,” he said.

According to The Weather Channel, Tropical Storm Noel was packing winds of 45 mph and departing Hispaniola Monday. The expected track is toward the Bahamas, and Noel is not anticipated to reach the Gulf of Mexico. “The storm may strengthen slightly as it grinds through the Bahamas over the next couple of days on a north-northwest or northwest course. During the day Wednesday, a more northerly track may take shape, followed by a turn to the northeast on Thursday,” the forecaster said. Florida is forecast to see high winds and surf due more to a high-pressure system to the north than the storm.

The persistent rise in natural gas prices has end-users on edge. “Every time the market dips, we have end-user clients ready to buy,” said a Washington, DC broker. He added that “all summer long these people [end-users] sat on their hands and then finally they realized that crude oil was $93, and they better lock in some natural gas.”

He went on to say that natural gas “tried to sell off and it just can’t. One contradiction is that if the Fed lower interest rates tomorrow by another 50 basis points as it is rumored, it will help stabilize the mess in the mortgage industry, but it also introduces inflation. What do you do to protect yourself against inflation? You buy hard assets like metals, oil and theoretically natural gas.”

Other traders see natural gas as laboring under burdensome supplies. “Natural gas continues to be weighed down by fairly negative fundamentals. Last week’s injection was considerably higher than expected, but the market failed to break, probably because the complex was soaring to new record highs,” said Mike DeVooght of DEVO Capital Management, a Colorado-based trading and risk management firm. He advises clients to hold current positions.

End-users are counseled to stand aside, and producers should hold short a winter strip at $9 for 65% of production and also stay short a summer strip at $7.90 to $8.00, he said in a note to clients.

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