December natural gas futures registered a modest decline as traders acknowledged that the market was awaiting weather data that might show a continuation of the cold weather currently pummeling the East.

December futures slipped 1.7 cents to $6.516 but not before trading as high as $6.704 and as low as $6.418 in electronic trading. January futures dropped 3.9 cents to $6.602. December crude oil continued to erode by losing 56 cents to $54.39/bbl.

“We are really stuck in the middle here, not making any great moves up or down,” said a New York floor trader. He added that he thought the market was waiting for the next weather forecast. “I’m hearing cold weather is coming in, but we are waiting for the 15-day [forecast] to see what the weather is like at the end of next week. We are kind of cold now, in the 30s, but everyone is waiting to see if it’s going to hold.”

The AccuWeather.com 11- to 15-day forecast calls for normal to above-normal temperatures for most of the country. Only a portion of the Southeast composed of Alabama, eastern Tennessee, portions of Kentucky and Virginia, North and South Carolina, Georgia and northern Florida is expected to be below normal.

Longer term, traders see a market burdened with too much supply. “There’s too much production around and it keeps growing every month,” said a Houston analyst. He noted that “things were getting exacerbated by lower crude and equity prices, but the bottom line is that there are bearish dynamics in place for natural gas. Demand is going down; we don’t need any incremental supplies, and supply keeps growing, and that won’t change until you drop the rig count significantly.”

According to the analyst, the demand side didn’t matter because “we are in a financial disaster around the world. What’s going to bring demand back anytime soon? The world is deleveraging.”

“There will be some short-term [price] aberrations in natural gas because it is winter. You get a little cold weather and price pops. By the time next spring arrives prices are going a lot lower. Until producers start shutting in and the rig count materially changes, production is going to continue to grow. I look for under $5,” he said.

Others see the market as somewhat resilient to cold weather. “If heating oil futures can shrug off the current cold spell, we feel that the natural gas market can do the same, especially in view of an approximate 3.5% supply surplus against average levels,” said Jim Ritterbusch of Ritterbusch and Associates. He admitted that he thought the surplus would be reduced during the next few weeks, but expected any bullish market response to weather “as likely to be limited by the continued and unrelenting deleveraging process that remains prevalent across most commodity asset groups.”

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