From American Energy

December 2007 Natural Gas Report

The natural gas market has fallen and it can't get up. Record high working storage, warm temperatures and record short futures positions on the NYMEX have combined to push the January NYMEX futures contract to new contract lows. The market sentiment is extremely bearish. On Dec 17th, the January futures contract broke below $7.00 and to a new contract low of $6.91 before bouncing back slightly. With the lack of any bullish fundamental news, noncommercial speculative investment funds on the NYMEX have continued to build unprecedented short futures positions. The most recent Commitment of Traders report revealed speculative funds hold a total short futures exposure of 185,141 contracts and a net short futures position of 92,881 contracts. To put this in perspective, the old record was 71,675 set on July 24th. As we have experienced in the past, when you have a huge position amassed on one side of the market and conditions change effecting market perception, a spike in price will occur as traders� frantically scramble to liquidate their position at the same time. In this case, should weather forecasts start showing cold air is on the way we could see a rather large spike in prices to the upside.