Buoyed by forecasts calling for record low temperatures in parts of New England over the weekend, the natural gas futures market rocketed to its highest level in 10 months — $7.63 — in Friday morning Access trade. But after notching a gap-higher open for the start of the regular trading session, profit-taking entered the fray, rescinding a portion of the day’s advances.

And while some believe that trend lower may continue for the next couple of weeks, bulls cannot scoff at the recent price action. At $7.287, the February contract was 19.3 cents higher for the session and $1.10 higher for the week.

Ice climbers, polar bears, bull traders and others who love cold weather didn’t have to look very far on Friday. The National Weather Service reported low temperatures in northern New Hampshire of negative 36 degrees Fahrenheit overnight Thursday, and Saturday was expected to see high temperatures 15 to 30 degrees below average from Maine to Virginia. The East will receive a brief reprieve early this week, followed by another blast that the NWS suggests “could be even colder than [last] weekend.”

In the longer term, the chilly weather looks like it may be here to stay. According to the latest eight- to 14-day forecast map released by the NWS Friday, the entire U.S. — with the exception of a sliver of the West Coast and south Florida, which will be normal — is expected to see below normal temperatures for the Jan. 17-23 period.

In fact, the weather forecasts at the end of last week were so foreboding that traders were able to look past undeniably bearish storage news released Thursday. According to the Energy Information Administration, storage inventories decreased by 52 Bcf to 2,567 Bcf during the week ending Jan. 2. Not only did the withdrawal fall short of the year-ago figure of 86 Bcf, but it also came in below the range of market expectations centered on a 56-90 Bcf takeaway. Supplies are now 236 Bcf above last year’s level and 196 Bcf more than the five-year average.

Looking ahead, traders are eager to see what the EIA announces in this week’s storage report. While the knee-jerk reaction is to call for a large withdrawal based on the cold weather, one needs to take into account the fact that the chilly temperatures did not show up until nearly midweek on the East Coast and the storage report covers the week ending Friday at 9 a.m. Early expectations suggest a withdrawal in the 150-200 Bcf range.

And while storage may be turning bullish, technical factors are showing signs of topping. Though last week’s series of higher highs and higher lows was impressive, market-watchers view the market as being in a precariously overbought position. Combined with the unavoidable pull lower from the $7.15-20 chart gap created by Friday’s higher open, you have the recipe for more profit-taking early this week.

Craig Coberly of GSC Energy in Atlanta views Friday’s $7.63 high as an important “hinge point,” between a short-term bearish and short-term bullish outlook. Should the $7.63 level hold as a top, Coberly sees a move lower over the next 10-20 day period to complete “the down-up-down-sideways pattern I believe is developing from the December high,” he said pointing to the $6.13 area as a possible target.

On the other hand, Coberly warns that trading above $7.63 in the next few days opens up a potentially very bullish situation. “It’s possible prices might creep higher [under this scenario], but it’s more likely prices would virtually explode through this resistance and quickly reach $8.10-15 on its way to $9.00 or higher,” he hedged.

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