January natural gas futures fell in erratic, choppy trading Monday as analysts see continued weakness stemming from ample supplies and fickle cold weather. The January contract fell 17.6 cents to $5.566 and February lost 15.5 cents to $5.612. January crude oil rose $2.90 to $43.71/bbl.

“Production costs never placed a floor under any market. I think there is room for this market to stretch lower than many anticipate,” said Jim Ritterbusch of Ritterbusch and Associates. He added that he hadn’t seen enough in the way of production cuts onshore to stem the decline. “[Therefore] whenever you get a change in the temperature forecasts, you get a sharp response like today,” he said.

January futures reached a high of $5.738 early in electronic trading, but within just a little over an hour had plunged to $5.493.

“I didn’t catch this downmove very well, but I have told people to look at the chart. It looks awful,” Ritterbusch said. Earlier he suggested that based on congestion pattern calculations that held prices above $6 from late October to early December, any decline would take the market down to $5.46. In electronic trading the January contract fell to $5.484 before rebounding to settle at $5.566. “That could hold as support for a while, but this market looks pretty gnarly,” he said.

“Our low target is about $5.25, and that is rock bottom. You won’t find anyone selling below that going into the winter months,” said John Woods, senior trader at Integrity Trading in New York. He said there hasn’t been that much of a [heating] need for natural gas. “It’s in the teens, but by Wednesday it’s supposed to be back up to 50 degrees.”

“I would look for a trading range between $5.25 to $6.25 to $6.33. That’s probably our mark up there.”

Others also see weather bulls unable to scratch a rally out of healthy supply data. “Last week’s storage withdrawal figure, which came in at 64 Bcf [right in the middle of expectations for a draw of 63-68 Bcf], was seen as disappointing,” contends Peter Beutel of Cameron Hanover, a Connecticut-based energy consulting firm. His analysis showed that temperatures had been much colder for the week ended Nov. 28 than for the week ended Nov. 21, yet the drawdown was significantly less. About 300 Mcf/d had returned to production during the week under review, but market observers had expected more consumption.

If consumption could not expand on the amount of gas pulled from storage during a bitterly cold week, then what could traders expect moving forward? It was in that regard that last week’s bearish economic figures had brought in selling, Beutel said.

Equity market responded positively to remarks made by President-Elect Obama over the weekend. According to a CNN report, Obama said the nation is facing a financial situation that is “going to get worse,” and that his top priority is building a recovery plan “equal to the task.” According to the report, infrastructure, energy programs and school construction projects will get people working and ultimately help build a stronger economy. The Dow Jones Industrial Average rose 298 points to 8,934.

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