At the close of futures trading Tuesday, it was an open question whether March futures or spot natgas cash prices would prove more resilient. In the end, futures proved slightly more hardy, sustaining losses about a penny less than cash.

In spite of forecasts calling for increased near-term demand, stout declines in California and the Northeast were able to outdo more moderate losses in the Rockies, Texas and the Midcontinent. The NGI National Spot Gas Average fell 16 cents to $1.90.

Futures opened lower and never looked back as the market had to endure not only dim prospects for any market-moving cold, but also voracious selling in petroleum and equity markets. At the close, March was down 12.7 cents to $2.025 and April had slid 10.6 cents to $2.120. March crude oil skidded $1.74 to $29.88/bbl and the Dow Jones Industrial Average fell 295 points to 16,154.

As long as higher natgas demand results in higher prices, near-term physical prices should be due for a rebound as an aggressive weather system in place over the Rockies starts to venture eastward.

“Lower 48 demand is set to pick back up after the recent lull. The winter storm system currently parked over the Rockies is set to move eastward starting [Tuesday] and leave cold air in its wake,” said industry consultant Genscape Energy in a Tuesday morning report. “On a national basis, population-weighted HDDs will return to seasonal norms by Friday, retreat during the weekend, and return to normal again next week. This week, HDDs in West Coast, Desert Southwest, and Rockies markets will remain significantly above normal, keeping demand in California/Nevada above 8 Bcf/d and Rockies demand rising to 3 Bcf/d by Thursday. Midwest demand will hold steady around 12 Bcf/d, while Appalachia demand will begin climbing Thursday towards a peak of 16.5 Bcf/d by Friday.

“Following the weekend, Appalachia demand is forecast to crest 17 Bcf/d. New England demand will also be on the rise later this week into next, reaching a peak of 3.26 Bcf/d by Friday and again Monday. (This will remain well below the winter-to-date high of 3.89 Bcf/d reached in early January). Southeast/Mid-Atlantic demand is forecast to increase to a high of 18.6 Bcf/d by Friday.”

Those demand increases can’t come soon enough as NGI National Spot Gas Average prices over the last two days have plummeted a total of 24 cents.

For the moment, however, traders will have to deal with a futures market flirting with $2.00 and a cash market already averaging sub $2 at Texas, Midcontinent, Gulf and Rockies points. Only California physical gas is consistently above $2.00.

Gas at Malin shed 14 cents to $2.04, and deliveries to the SoCal Citygate were 14 cents lower as well to $2.25. Packages priced at the SoCal Border Avg. Average came in 15 cents lower at $2.09, and gas on El Paso S. Mainline/N. Baja changed hands down 14 cents at $2.13.

Other market hubs were lower as well. Gas at the Algonquin Citygate dropped 23 cents to $1.94, and gas at the Chicago Citygate fell 15 cents to $2.05. Deliveries to the Henry Hub were quoted 15 cents lower at $2.03, and gas at the PG&E Citygate fell 11 cents to $2.29.

Market bears see opportunities. “Trading volume was huge today,” a New York floor trader told NGI. “192,000 in the spot month is almost double what we normally trade, and it looks like a lot of fund and managed account selling. As long as we stay above $2, I think we are OK. For this decline to have any steam to the downside, it has to settle below $2.”

Longer term, analysts see the market showing little inclination to embrace the temperature factor and instead concentrating on storage. “This market’s price plunge since the beginning of this new week and month appears out of sync with recent revisions to the short-term six-14 day temperature views that are offering a mix at the present time,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients.

“However, we will note that the forecasts for colder than normal trends are favoring only minor deviations from normal. And given a sizable supply surplus against five-year averages of around 432 Bcf that is unlikely to be disturbed significantly by this week’s EIA release, the money managers have obviously become much more assertive in gravitating back into the short side of this market. While the open interest configuration is still skewed heavily in favor of a large net short speculative holding, this net bearish length is not approaching our red zone that would suggest another phase of short covering.

“The market also appears to be sending off signals that the temperature factor is diminishing in importance amid this advanced stage of the HDD cycle. Meanwhile, some expected production slippage could be seen going forward given the magnitude of both oil and gas rig count declines. But any drop in production could easily be offset by an equivalent uptick in imports or possible downsizing in exports.”

No major changes were reported in overnight weather model runs, but a few modest changes mostly tilted in the direction of further moderation. “The model consensus — especially the more skillful ensembles — all lost single-digit HDD levels of demand overnight,” said Commodity Weather Group in its Tuesday morning report.

“We see mainly warmer changes in the short-range period for the Midwest, East and South, but then mixed changes prevail for the six-10 day with a warmer West but slightly colder East and South. The 11-15 day is also mixed, but warmer changes were seen more commonly in the South and West with still some variability for the Midwest to East. Our preliminary demand change estimate is also a single-digit HDD loss compared to yesterday’s forecast.

“The two big stories right now are still a short-lived but possibly stronger cold event in the Feb. 8-12th range, and then a flattening of the jet stream to return a potentially much warmer pattern by the middle of February. In fact, the jet stream looks of the late 11-15 day modeling this morning suggests potentially bigger warmer risks to our outlook by that point,” said Matt Rogers, president of the firm.