Bearish

After tumbling lower during the first hour of trading, natural gas futures rebounded late Friday morning as traders covered shorts in an effort to minimize their exposure should a bullish development — either geopolitical or weather related — emerge over the long holiday weekend. In an abbreviated session cut short at 1 p.m. EST ahead of the Monday holiday, the March contract closed at $5.851, up 11.1 cents on the day, but down 19.2 cents for the week. Futures will reopen Monday at 7 p.m in Access trading with regular open-outcry trading set to resume at 10 a.m. Tuesday.

Despite undeniably bearish medium-range weather forecasts, natural gas futures eased only slightly Friday as traders were hesitant to short the market for fear they would receive a bullish surprise Monday morning.

After oscillating higher, then lower and carving out a quick 13-cent trading range in 20 minutes Thursday morning, January natural gas futures finished the day with a bang as traders priced in another in a string of bullish storage reports (91 Bcf withdrawal). January finished at $4.406, up 10.8 cents for the session and just four ticks below its daily high at $4.41.

Confronted with bullish near-term forecasts and bearish longer-lead weather outlooks, natural gas futures traders chose to side with the latter Tuesday as they quickly took back a lion’s share of Monday’s 12-cent advance. By virtue of its 9.4-cent decline and $4.226 close Tuesday, the January contract again rests near the bottom of the $4.16-48 trading range. The same range has bounded the market’s price moves since Nov. 18.

After falling during the regular session Wednesday, natural gas futures rebounded to erase that loss in the late afternoon as traders reacted to the news of a larger-than-expected 49 Bcf storage withdrawal.

Despite softer natural gas futures and last week’s bearish weather forecasts for northern market areas this week, cash prices achieved moderate gains at nearly all points Monday. Most upticks ranged within 3-4 cents to either side of a dime, while flat to slightly lower numbers reigned in the Rockies.

In a market that was already weakened by technical bearishness, natural gas futures were sent spiraling lower Friday on reports that the El Nino weather pattern will bring above-normal temperatures to the central United States this winter.

Natural gas storage injection rates have been more bearish than the market understands, and gas prices may need to fall over the next two months to lead consumers to burn more, according to Lehman Brothers’ energy analyst Thomas Driscoll.

Natural gas storage injection rates have been more bearish than the market understands, and gas prices may need to fall over the next two months to lead consumers to burn more, according to Lehman Brothers’ energy analyst Thomas Driscoll.