After last week's EIA natural gas storage report showed a smaller than expected draw of 81 bcf and the latest US production data from the EIA showed October production at a new record high of 71.28 bcf per day, the bear camp has to remain confident in their overall positioning. However, with some slightly colder weather ahead, a favorable macroeconomic condition and a potential short-term oversold condition, it is possible that natural gas is poised to mount some short covering gains. With the Commitments of Traders Futures and Options report as of December 27th showing non-commercial traders to be net short 163,243 contracts (an increase of 1,926 contracts) and the market falling further into last week's lows, the initial bounce this morning is probably technically justified. However, with the non-commercial and nonreportable traders combined holding a net short position of only 138,911 contracts, it is possible that a little short covering will set the market up for losses later on this week.
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