Warmer weather, near-record storage levels and a lack of trading volume have dragged the natural gas market down, observes Dean Hazelcorn, trader for Coquest Inc. “After the Amaranth thing, you see a lot less big funds. All you need is that money flow and you get that number back up,” he says. Without it, he expects February gas to trade sideways to downward. If support fails at $6.96, we could trade down to $5.50. Conversely, it wouldn’t take much to blow through the previous high of $7.44. “It doesn’t need much of an excuse to rally,” he says.
“There has been a continual lowering and degradation of industrial demand,” says Kyle M. Cooper, energy analyst for IAF Advisors, and continual growth in the residential and commercial sector, resulting in a market almost entirely driven by weather. “It sounds like a cop out, but you have to put in a $3 to $4 range, it all comes down to Mother Nature,” he says; and La Nina has created unsettled weather with no locking pattern, and predictions have been inaccurate. “How long and how deep that cold penetrates for the balance of the month will determine that,” he says. “We are at $7; if it stays warm, then $5 is possible,” and if the cold heads south of Chicago, then even $11 is not out of the question. “Cold air in Canada or Minnesota is not going to do it,” he says.