Natural gas futures sifted lower Monday following news ofwarming East Coast temperatures and amid a weakening technicalpicture. After a disappointing sub-$3.00 opening, the Novembercontract chopped sideways Monday to settle at $3.016, off 5.6-centsfor the session. Volume was somewhat thin as only 63,328 contractschanged hands.

Several sources contacted by NGI were quick to point tomoderating (warmer) temperatures, both in the forecast and alreadybeing borne out in many East Coast markets as the overridingnegative feature Monday. “Weather forecasts really put a chink inthe armor,” said a risk manager. “There are three main componentsthat are affecting prices right now — storage, cash prices andweather. Cash prices are some 50 cents above index and storage willlikely see another bullish report this Wednesday. But now we have abreak in cool weather adding a key demand component.” He went on tosuggest that things might not be much better next month. “Novembercan be a scary time for bulls. You can expect seven to nine dayswith virtually no weather demand and when that is coupled withstorage injections turning to zero on Oct. 31 it can mean a ton ofexcess gas on the market.”

In addition to that less than favorable fundamental scenario,the technical outlook may also be losing its luster. According toNew Mexico-based Kase and Company a correction is in the making.”While moving to new highs is still possible, we will probably moveinto a correction first. [Prices] should stall between currenthighs and $3.185. While the first test area is around $3.00, majorsupport is found at $2.86 with a reasonable probability to extendto $2.75,” the group wrote in its weekly KaseFax.

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