Pressured by the bearish agreement of mild current temperatures and unseasonably warm weather forecasts, the natural gas futures market tumbled lower in waves of selling during both Sunday night’s Access trading and Monday’s regular open-outcry session.

Although the market held and even rebounded modestly off the $4.70 level late Monday, the damage had already been done. At $4.764, the December contract finished 45.6 cents below Friday’s high and a whopping 34.8 cents off Friday’s close.

“Lower prices in the Sunday night session set the tone and local traders — many of whom were long over the weekend — were quick to liquidate on the open Monday,” said Tom Saal of Commercial Brokerage Corp.

Other market watchers pointed to current bearish weather fundamentals. “Although the current warming trend in U.S. weather was well forecast even before Friday’s spike, the market is certainly using its arrival as a club to bludgeon prices back inside their prior range,” said Tim Evans of IFR Pegasus in New York.

According to the latest medium-range forecasts released Monday by the National Weather Service, the above-normal readings are expected to continue in the key Northeast, Midwest, and Mid-Atlantic regions at least through the end of the month. Only the West Coast is expected to see below-normal temperatures during the second half of November.

These forecasts for mild weather leave storage prognosticators in somewhat of a pickle. Relatively nominal heating degree day accumulations for last week point to a 10-27 Bcf withdrawal when the EIA reports its weekly storage report this Thursday. However, next week’s report could offer a surprise. Forecasts for the weather this week suggest the heating degree day accumulations will be similar to that of the week ending Nov. 8, when the market was able to inject a hefty 32 Bcf. “Compared with the 40 Bcf average withdrawal for that week over the past five years, this implies a dramatically bearish event,” noted Evans.

While Monday’s sell-off was undoubtedly a victory for the bears, the war is far from over, said Saal. “You can expect large swings over the next 30 days…. As long as we hold $4.60, this market has the potential to rally. As far as we’re concerned, Monday’s price action was just a retracement following Friday’s big move higher.”

In daily technicals, Saal sees support at $4.72, which could be a pivot point for short-term traders. On the upside, Evans targets the $4.85 level as key. A move through that level would likely lead to a retest of psychological resistance at $5.00.

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