January natural gas futures pushed to a new high on Monday at $5.409 as temperature forecasts were calling for the chill to stick around longer than expected for much of the United States. The prompt-month contract ended up closing out the day at $5.332, up 16.9 cents from Friday’s finish.

“The market is looking pretty strong at this point. We made a new high and a new high on a closing basis,” said Julio Sera, a broker with Hencorp Futures LC in Miami. “If the market continues its recent upward trend, the trading advice going forward is to buy the dips.

“The recent arrival of cold has certainly gotten the attention of traders,” he added. “It looks like this week is going to be even colder than it was last week in a number of high gas-usage regions. A continued streak of cold really is going to force the hands of these noncommercials to take their short positions off their books.”

Sera said that if the market does not close this week above the Bollinger band that currently sits at $5.447, then there could definitely be a pullback. “We could see prices sink a bit, but with winter right around the corner we likely won’t fall too far,” he said. “I wouldn’t be surprised to see a couple of dips…but I also wouldn’t be surprised to see $6 either.”

Some top traders see market crosscurrents that argue against holding on to any kind of short position. “Natural gas did get a boost last week by some serious cold temperatures and snow around the country,” said Mike DeVooght, president of DEVO Capital, a trading and risk management firm in Colorado.

DeVooght is wary that those counting on eventual moderation of near-term weather conditions and a reassertion of burdensome supplies to lower prices may be on the wrong track. “On a trading basis, especially for the speculator, we would be very cautious about having short positions going into year-end. A popular trade has been to be short the U.S. dollar, short domestic-based commodities and long commodities that have a significant foreign demand component.” In his view that trade is “overdue for a significant correction” and he suggested to speculative accounts last week to book gains on the trade. “For hedgers we will hold our current collars and hope for some type of significant short-covering rally that will give us an opportunity to add to our short position.”

Last week’s cold weather was enough to prompt a rush to the door for those fund managers holding speculative short positions. The Commodity Futures Trading Commission reported Friday that for the week ended Dec. 8 funds and managed accounts reduced both their short and long natural gas holdings. Managed money long natural gas positions consisting of both futures and options fell 8,710 contracts to 119,664, but short holdings fell a stout 25,610 contracts, or more than 13%, to 167,856. For the five trading days ended Dec. 8, January natural gas futures rose 35.2 cents to $5.114. Total open interest stands at 898,244 contracts, a decrease of more than 12,000 from the week before.

Forecaster WSI Corp. of Andover, MA, expects below-normal temperatures to prevail until Dec. 29. In its 11- to 15-day forecast it called for below-normal temperatures south of a sinuous line stretching across the country from New England, the southern Great Lakes and Rocky Mountains to Southern California. “Widespread below- and much below-normal temperatures are expected to encompass the central and eastern U.S. The coldest anomalies are anticipated over Texas and the southeastern U.S.,” the forecasting firm said.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.