The first taste of cold and snow in the Northeast and Mid-Atlantic regions this past weekend combined with another cold front on Monday in the West to help give natural gas futures bulls some traction as the January contract shot 38.5 cents higher on Monday to close at $4.971.

After recording a low of $4.775 in morning regular session trade, the prompt-month contract in the afternoon pushed briefly above psychological resistance at $5 to a high of $5.009 before coming to a close on the day. While much has been made of winter’s arrival, some market experts warn that current market fundamentals likely won’t support a run above the $5.318 high for the move recorded in late October.

“As we’ve been talking about for the last couple of weeks, all this market needed was a burst of cold to give prices a little pep in their step. An increase of 51.2 cents over the last two sessions certainly qualifies,” said Steve Blair, a broker with Rafferty Technical Research in New York. “The arrival of some winter cold in the Northeast certainly grabbed the market’s attention because the region is the primary consumer of natural gas for heating purposes. The cold blast was likely the primary culprit for the uptick, but there was probably some fund short-covering coming in to help this thing higher as well.”

Blair said the run-up was likely warranted, but warned that follow-through to the upside could be hard to find. “Winter cold has finally shown its face, but despite the bullish move I don’t think we’re going to see a straight shot higher,” he said. “I don’t think were going to see $6 in the next few days. We haven’t broken any new price territory and we still have a ton of gas in storage, so bulls should be cautious here. We might even see some pullbacks here and there, but the cold has probably put a floor under the market.”

Some traders see the weather-storage dynamic in full force. “The most recent EIA [Energy Information Administration] underground storage reports have given us a constantly higher set of surpluses against a year ago and against the five-year average, and these increases have really taken the wind from the bulls’ sails,” said Peter Beutel, president of Connecticut-based Cameron Hanover. With winter at hand he expects “bitterly cold temperatures could give us bullish reports over the next few weeks. As is almost always the case in this market, weather forecasts are likely to set the stage for price movements.”

MDA EarthSat in its six- to 10-day forecast shows a broad area of the country to be under a blanket of below-normal temperatures. North of a line from northwest Montana to South Carolina is expected to be below normal. “The forecast is colder today overall as belows and much belows are expected to be slower to fade across the central U.S.,” the forecaster said. “The most intense, widespread cold is expected during the first half of the period across the northern tier as high pressure seeps southward from the upper latitudes. This cold should slowly moderate as it pushes eastward late. The western U.S. will undergo some slow warming trends late as weak ridging forms, but this will push most areas only towards normal initially. After a warm start, colder conditions are forecast to return to Texas by period’s end.”

Looking at the more immediate-term outlook, a major winter storm was battering the western United States and was expected to move northeast through the week, bringing single-digit temperatures into the Midwest and Upper Great Lakes. “It’s forecast to affect about 17 states, from California all the way to Michigan,” CNN meteorologist Sean Morris said.

Reading the natural gas market’s open interest for the abbreviated trading week ending Dec. 1, it would appear that the funds are still favoring the short side of the market, according to the Commodity Futures Trading Commission’s Commitments of Traders report released Friday. For the week the managed money component of natural gas futures and options open interest showed speculative traders holding 193,465 contracts short and 128,374 contracts long. The short open interest fell by 581 contracts and the long open interest declined by 5,071 contracts. For the five-day period ending Dec. 1 January natural gas futures fell by 0.4 cents to $4.762.

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