As many traders predicted, the futures market continued lowerThursday morning amid a swirl of bearish fundamental factors, whichwere freshly updated Wednesday evening. But the dip wasshort-lived, and afternoon buying bid the spot January contractback up to test resistance, before settling at $1.84, off 0.7 centsfor the day.

Yesterday’s rebound came as a surprise to most, who were lookingfor prices to continue lower into the weekend. The National WeatherService and the American Gas Association released reports Wednesdayshowing both warmer temperatures and an increasing supply ofunderground storage gas respectively. And in addition to theunfavorable demand and supply outlook, cash prices offered littlesupport yesterday, slipping a dime or more in some locations.

A Midcontinent trader thinks the wide price swings exhibited bythe cash market for the first part of December are surprising,considering the lack of cold weather. “Cash has seen larger dailygains and losses than the futures market and we haven’t even hadour first real shot of winter. Temperatures are more seasonal nowthan they were last week, but cash could be in for even morevolatility when we get our first real cold blast. That couldtranslate into sizable gains in the futures market as well,” hereasoned.

But the Pegasus Econometric Group remains unflinchingly bearishdespite the choppy trading activity. They continue to cite thewinter of 1994-95, which was the last time storage levels were thishigh, as a possible scenario for pricing going into 1999. The groupnotes that although storage is even more plentiful now, the January1995 contract spiraled to a $1.535 low before limping off the boardat its final $1.639 settlement price. In daily technicals, Pegasustargets $1.63 and 1.93 as support and resistance for January.

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