Snow and cold temperatures in the Great Lakes and the Northeastyesterday and some follow-through buying on Friday’s strength sentgas futures to a new all-time high of $6.360/MMBtu. December endedthe session up 14.9 cents to $6.249/MMBtu.

After a massive gap at the open from Friday’s high of $6.14, thenear-month contract rallied to its highs by noon but was unable tohold on and ended on a slightly weak note about 3.9 cents above itsdaily low of $6.210.

“Today we have a new all-time high for gas futures. We’ve got anew high for the December contract and we’ve got lower momentumthan when we first hit $6.32 last Wednesday,” said Tim Evans ofPegasus. “Basically you got some potential bearish divergence here.It’s a minor new high. We’re not sure yet whether we’re going tosee super follow through and $7 here we come. You just have towatch the price action. If it starts marching higher like nobody’sbusiness then it’s going to $7. If we break this thing back under$6.20 or so, it tends to say that thoughts of $7 are premature;we’ve got more work to do in the recent range.”

The recent range has been nothing but phenomenal. The lastall-time high of $6.32 was reached last Wednesday. On Thursday,prices came down hard to a low of $5.780, and then on Friday, themarket was down early but came up late to end at $6.100. Andyesterday, there was a heavy follow-through buying initially butthen mostly sideways trading in the high $6.20s throughout the day.

“It’s been nasty in terms of the magnitude of the swings overthe past three days,” a futures analyst noted. “I expect [thismarket] to drive me crazy. About the only thing useful I can say isthat in a market like this you are confronted with a choice. Youcan back off to a longer-term view in which you might consider theweather being colder than normal, storage being lower than lastyear, and maintain a bullish bias and put a sell stop under theprior week’s low and walk that sell stop up behind the market. Theproblem with that approach is that last week’s low in December was$5.555. Do you really want to risk the 75-80 cent drop to thatlevel? That’s a lot. If that’s your idea of limited risk then youare only trading natural gas because they won’t let you in thecasinos any more. The other approach is to go very short term andsay I’m going to watch this on a 15-minute bar chart and play alongwith the locals. I don’t think natural gas traders should beleaving their desks for lunch. They probably couldn’t keep theirlunch down anyway.”

Kyle Cooper of Salomon Smith Barney (SSB) said he expectsbearish short-term weather to pull the contract down prior to theholiday. However, he said SSB Meteorologist Jon Davis isforecasting a return to normal and colder than normal temperaturesafter the holiday. Wednesday’s storage report and next Monday’sweather could set the stage for a huge post-holiday move. Coopersaid he is expecting an 85-95 Bcf withdrawal.

The latest six- to 10-day forecast by the National WeatherService is calling for normal temperatures throughout most of thecountry. Below normal temperatures are expected across theSoutheast, Gulf Coast region and South and West Texas. Above normaltemperatures are forecast over the Dakotas, most of Minnesota andMontana, and over Southern California.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.