Natural gas traders sold off the December 2007 futures today by nearly 2% on inventory data that showed a draw of 9 billion cubic feet, within the expected range, but nonetheless disappointing traders who were hoping for a larger draw. This was the first draw of this winter season, and even though natural gas is at record storage levels, we also have had the coldest start to November in four years.
As these natural gas traders hyper-focus on last week’s inventory data, many major weather forecasting institutions have predicted a cold snap hitting the East and colder air hitting the Mid-West, the nation’s largest residential natural gas consumers, this week. I believe floor traders have oversold Natural Gas on today’s inventory data. They tend to myopically focus on what was, not what is. The data we got today was backward looking and is of no use when attempting to forecast the future draw. The best indication there is the weather and I’ll tell you as a natural gas heat user, I’m keeping the furnace on because it’s COLD!
In summary, the cold snap that traders are hoping for may well be on the way.
http://www.weather.com/newscenter/fcstsummary.html?from=wxcenter_news
http://www.accuweather.com/news-story.asp?partner=google&traveler=0&article=0
http://www.cpc.noaa.gov/ (see 6-10 day and 8-14 day temp outlook).
Peter Linder, an energy analyst and senior adviser with Calgary-based DeltaOne Energy Fund, expects any price decline to be short-lived. Buyers may return if gas falls below $7.70 per million British thermal units as they examine the prospect for colder weather later this month and into early December.