Agreed...looks to me like there will definitely be a dip with the U.S. gov't. taking a serious look at things. The following article was in todays Globe and Mail. Just another opinion but it is these opinions that helps us make our decisions. I don't wish us in canada an early winter. We just barely got summer recently. Anyway...long story short hold on for the ride and buy on the dip.

The gravity-defying rally in natural gas prices (NG-FT3.510.051.42%)may have more to do with regulatory worries than market fundamentals, traders and analysts said.

The benchmark natural gas futures contract on the New York Mercantile Exchange jumped 44 cents (U.S.) or more than 13 per cent yesterday to $3.76 per million British thermal units, marking the third time in a week it has racked up a better 10-per-cent rise. After falling to seven-year lows near $2.50 early this month, natural gas has surged 50 per cent in less than two weeks - despite tepid demand and record seasonal supply levels.

"I think people just got tired of selling it," said Martin King, energy commodities analyst at FirstEnergy Capital Corp. in Calgary. "They just couldn't short it any more."

“ It's very possible that commodity hedge funds were afraid of position restrictions, and covered their shorts. ”— Phil Flynn, energy analyst at PFGBest Research

Speculators have been sitting on a historically massive short position in natural gas futures - second only to the short-selling frenzy during last fall's financial-market meltdown - opening the door for some significant unwinding and profit-taking once the market found a bottom, traders said. But that has been exacerbated by the looming threat of a U.S. regulatory crackdown on the size of speculative positions in the futures market, which analysts said may be prompting commodity funds to slash their short holdings in anticipation.

"It's very possible that commodity hedge funds were afraid of position restrictions, and covered their shorts," said Phil Flynn, energy analyst at PFGBest Research in Chicago.

The Commodity Futures Trading Commission and the U.S. Department of Energy are both looking into possible limits on speculative trading in the energy market, after huge price swings over the past two years led to accusations that speculative trading had wildly distorted the market. Though no decisions have been made, the possibility of position size restrictions for large investment funds has been raised.

Natural gas exchange-traded funds, which could also fall under the restrictions, are in the midst of their monthly roll-over of their futures contract holdings this week, and might also be dumping some positions, traders said.

Natural Gas (NG-FT)

3.51 0.05 1.42%

Range: 1 Day 5 Day 1 Year

Mr. Flynn said the rally has also coincided with what is usually an attractive time of year for natural gas prices.

"The market has a tendency to bottom and rally in September," he said. "It turned around almost on seasonal cue."

In addition, market watchers said, the recent weak prices have been discouraging natural gas production. The number of active natural gas drilling rigs in the U.S. market slipped again last week, after stabilizing near seven-year lows over the summer, rekindling expectations of tighter supplies in the coming months. That, combined with talk of an economic recovery that could give a boost to demand, are supportive of higher gas prices, analysts said.

However, they cautioned that given the still historically weak market conditions, gas prices could quickly run into a wall of reality - perhaps as soon as today, when the U.S. Department of Energy releases its weekly gas inventory data. Stockpiles in U.S. storage facilities are at record highs for this time of year - about 17 per cent above their five-year average.

"I think we could be in for a rude awakening," said energy analyst Menal Petal of National Bank Financial in Calgary. "There's no reason for this to be up around $4."