November futures eased in light trading Monday as traders saw the day’s activity as insufficient to attract the attention of either bulls or bears. At the close November had fallen 2.5 cents to $3.604 and December had shuffled lower by 3.2 cents to $3.794. December crude oil rocketed higher in concert with equity market strength, adding $3.87 to $91.27/bbl.

“We’re still playing in that same pocket,” said a New York floor trader. “Today’s action was mostly sideways, but traders are looking at $3.51- 3.53 as near-term market support, but I think it may have to fall as low as the low teens to low $3.20s before the market can build a proper base to come back up again.

“I look for $3.73 to $3.75 to bring in more selling, but we couldn’t even make it that far. I don’t think [today’s] $3.60 is a meaningful close. If it fell to $3.51-3.53, you could make a case for support, but we’re stuck in the middle of the range.”

He added that he didn’t expect meaningful scale-down buying for at least another 20 cents. “In the mid $3.40s you’ll probably get some buying and then all through the $3.20s.”

Analysts following short-term weather see softer prices as cooler temperatures are delayed. “Some of Friday’s below-normal expectations within the one- to two-week outlooks were pushed out of the Midwest region per yesterday’s updates. And despite an expected significant downsizing in this week’s storage injection on Thursday, the build will again be comparatively large, especially in relation to the five-year average build of only 47 Bcf,” said Jim Ritterbusch of Ritterbusch and Associates. In a closing note to clients he said, “This market is still experiencing difficulty in gaining traction in either direction and today’s trade reinforced our expectation for a continued rangebound trade. Assuming no major shifts in the temperature views this week, we will look for a continued holding pattern during the next couple of sessions to be followed by a volatility spike on Thursday. We are suggesting a sideline stance for flat price traders since today’s close was about at the middle of our projected $3.45-3.75 parameters.”

According to Reuters, the 12-month strip reached a nine-year low Monday of $3.923, and traders attributed that to greater weakness in the more deferred portions of the price curve.

“The nearby’s [contracts] are pulling up [the strip] and the backs are under more pressure,” Ritterbusch told NGI.

Directional traders leaned on the short side of the market in the most recent reporting period, according to government figures. In its Commitments of Traders Report for the five trading sessions ended Oct. 18 the Commodity Futures Trading Commission said managed money reduced long futures and options moderately, but aggressively added to short holdings.

At the IntercontinentalExchange long futures and options (2,500 MMBtu per contract) fell by 12,000 to 248,938 and short contracts jumped by 48,205 to 162,251. At the New York Mercantile Exchange long futures and options (10,000 MMBtu per contract) grew by 1,598 to 125,116 and short holdings rose by 1,744 to 244,596. When adjusted for contract size, long positions at both exchanges fell by 1,402, but short futures and options jumped by 13,795. For the five trading days ended Oct. 18 November futures fell 6.3 cents to $3.553.

Consistent with the increase in short positions, analysts are looking for injection season-ending storage to approach last year’s record levels. “It will be difficult to build bullish scenarios here based on temperature forecast. If traders look entirely at the calendar, it is difficult to keep selling into a market that is at existing levels,” said Peter Beutel, publisher of Daily Oil Hedger.

From Beutel’s perspective, market bulls would do well to see prices hold steady. “Traders were taking a break from selling on Friday. Prices are oversold, again, and they remain near the lower Bollinger band. Traders are expecting further increases in underground storage levels before Nov. 1, but one might hope that we would see prices stabilize here first. Last year’s record amount held in underground storage was set at 3.84 Tcf. Most observers feel that this year’s final figure to start the heating season will be closer to that 3.84 [Tcf] figure and farther from the current 3.624 Tcf.”

Forecasts continue to call for below-normal temperatures to permeate the Southeast. In its morning six- to 10-day outlook, MDA EarthSat predicts sub-normal readings south and east of a line from Albany, NY, to Austin, TX. The Rocky Mountains and California are expected to be above normal. “This period features a bit more cold early in the Northeast and Mid-Atlantic compared to the forecast from last week, though the peak intensity in the Midwest has been scaled back some. This cold in the Northeast should include ‘much-belows’ at least on day six, when some precipitation may also be in play in the Mid-Atlantic. The western U.S. should see ‘aboves’ last through most of the period, though these should be of marginal intensity. Some of this warmth should advance into the Upper Midwest late. The highly unsettled nature of the pattern keeps plenty of risks in play, however, resulting in moderate confidence at best.”

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