Bullied by the one-two combination of cooler weather forecasts and speculative fund buying, the natural gas futures market accelerated higher Tuesday in a session marked by light activity and choppy trading action.

The February contract received the biggest buying boost, soaring 35.7 cents to close at $6.60 on its first day as Nymex prompt month. At 45,420, estimated volume was very light, evidence that most traders have hung it up for the year.

“The funds were still short as of last week and they were out there covering some of those positions [Tuesday],” said Tom Saal of Commercial Brokerage Corp. in Miami. A quick glance at the latest commitments of traders data from the Commodity Futures Trading Commission corroborates Saal’s view. As of last Monday, the non-commercial sector of the market was still net short 15,450 positions, up slightly from the 14,662 shorts the group held on Dec. 16.

During that six-day period the market dropped 42 cents — a significant pricing move not captured by the trading activity of the non-commercial funds. This missed opportunity suggests one of two things: either funds are backing away from the volatility of the market or they are poised to get long as prices move higher.

Looking ahead, the idea that prices will move higher is predicated basically on one factor — the weather. Private forecasters have for much of the second half of December been calling for an intrusion of cold air in the first week of January. And although bulls have had to endure some unusually mild weather in the meantime, it now appears they will get their reward.

According to New York-based Weather 2000, “some of the most bitterly cold air we’ve yet seen [will come] to the central U.S. early next week and then expand eastward. Because the sharpest cold will be concentrated away from the South, the resulting anomalies will be impressive indeed with max temperatures 15-20 degrees below normal in the north-central U.S. with isolated areas registering 40 degrees below normal,” the group continued.

However, weather forecasts will take a back seat to updated supply data when the Energy Information Administration releases updated storage data Wednesday at noon EST. Expectations are centered on a withdrawal of 102-140 Bcf, with most estimates coming in the mid-teens. Last year at this time the market witnessed a 123 Bcf takeaway and the five-year average pull works out to a 161 Bcf figure.

In daily technicals, Tuesday’s rally nicked the bottom end of the $6.95-7.20 resistance area seen by technician Craig Coberly of GSC Energy in Atlanta. On the downside, the February contract now has impressive support in conjunction with the lows at $6.00 and $6.05 notched last Tuesday and this Monday, respectively.

Gas trading at Nymex will cease at 1 p.m. EST Wednesday for the holidays and restart with Access trading Sunday night. Regular outcry trading will resume at 10 a.m. EST Monday.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.