Trading was mostly stable in natural gas futures on Tuesday despite the beating taken by crude oil futures in a nearby trading ring. Even with much of the country enduring or bracing for a mid-January cold snap, which already includes ice storms in the Midwest and Northeast, February natural gas put in a low of $6.460 and a high of $6.730 before settling Tuesday at $6.638, just 3.7 cents higher than Friday’s close.

Jay Levine, a broker with enerjay LLC, said that while crude continues to get “pummeled,” natural gas is doing well just to maintain its current level in light of the excess gas in storage. “A cold snap, for many the first this season, is likely helping bolster [February natural gas] if not fundamentally then psychologically — as any bone, however small, should help — with the entire complex technically very oversold,” he said. “It’s going to take more than a cold snap to aid a complex burdened with plenty of supply and not enough demand — and, up to this point, not nearly enough concern (fear) — if prices are to prevent much further erosion in fear premiums (still evident, and always will be in my opinion) regardless of existing, and historically quite bearish fundamentals.”

Levine added that viewing current energy prices on a historical basis, they are still quite high and susceptible to further declines, especially if any cold snap remains only a snap. “But if you’re looking for prices to return to ‘classically’ cheap levels, I fear you’re barking up the wrong tree, even as crude has dropped precipitously and natural gas has returned to pre-Katrina and Rita [price] levels,” he said. “Who knows, maybe there’ll be widespread cold below-normal temperatures late in the season, thereby mirroring the early winter cold that provided hints of a colder-than-normal winter, which turned out to be a bust.”

While February natural gas maintained its recent trading range on Tuesday, February crude continued its significant decline, dipping below $51/bbl at one point during the day before closing at $51.21/bbl, down $1.78 from Friday’s close. Tuesday’s drop coincided with Saudi Arabia’s announcement that the Organization of Petroleum Exporting Countries (OPEC) production cuts were working well and that there was no need for an emergency meeting. Over the first two weeks of the year, February crude has dropped $9.84 per barrel from the Dec. 29 close of $61.05/bbl to Tuesday’s $51.21/bbl settle.

Prior to the Saudia Arabia announcement, Levine said OPEC is not likely to stand pat. “Self-serving rhetoric aside — and difficult as it is to abide by any ‘agreement’ which [OPEC] may make or conjure up — you gotta know these price declines aren’t welcome and the wheels are in motion, in theory, to stop the bleeding,” Levine said. “It all makes sense to a long-term bull in bear clothes if you ask me, even if prices are on the defensive now.”

Looking at support and resistance lines basis February natural gas, the broker said he sees upside struggles beginning at $6.90, followed by $7.15 and $7.45 respectively, with support back in the low $6.60s/high $6.50s “if I was very aggressive” and back in the $6.35/$6.25 range “if I was not.”

Traders have been bracing for a long anticipated blast of cold air from the West. Although the West has been locked in an icebox, by the time the cold reaches eastern energy markets, its impact may be far less. Tuesday morning Denver awoke to 6 degrees. AccuWeather forecasts that by Friday the high in Chicago is expected to be 26, just 4 degrees shy of a normal 30. Philadelphia’s forecast high Friday of 43 is 4 degrees above a normal 39.

Accordingly, the National Weather Service (NWS) forecasts a below normal accumulation of heating degree days (HDD) in key energy markets for the week ending Jan. 20. The NWS says that Pennsylvania, New York and New Jersey will receive 216 HDD, or 48 less than normal. The industrialized states of Ohio, Indiana, Michigan, Illinois and Wisconsin are expected to “bask” under just 263 HDD, or 34 fewer than normal. For the heating season, which the NWS measures from July 1, New York, New Jersey and Pennsylvania have received 2,102 HDD, or 570 below normal, and the Midwest states above have experienced 2,627 HDD, or 389 fewer than normal.

Cold weather notwithstanding, technical traders see natural gas with some tall hurdles to clear before any uptrend can be established. Using retracement analysis, Walter Zimmerman of United Energy sees natural gas futures struggling to satisfy any kind of bullish criteria. He cites the need for February futures to reach $7.005 as a minimum upside target and although last week never made it closer than $6.800, “Friday’s strength suggests the $7.00 area could still be tested this week.

“How high must natgas rally in order to look like more than a bear market correction in a continuing decline? It must at least get above $7.790 as the 0.618 retracement of the $9.050 to $5.740 decline,” he said.

Others are looking for a selling opportunity. Phil Flynn of Alaron suggest selling February natural gas at $7.020 with a stop loss order at $7.220.

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