While a number of major midwestern and eastern gas consuming regions were being assaulted by a wintery mix Tuesday, natural gas futures traders pushed March futures 14.1 cents higher to $7.367. Trading was confined to a slim 19-cent range.

Despite moderating temperature forecasts, the industry continues to eye what could be a record-setting natural gas storage withdrawal when the Energy Information Administration reports data on Thursday for the week ended Feb. 9. The all-time record of a 260 Bcf storage withdrawal occurred during the week that ended Jan. 17, 1997.

Calling Thursday’s report potentially “monumental,” enerjay LLC broker Jay Levine said that while the wide 221-271 Bcf range of industry withdrawal estimates “isn’t the sole reason the market should remain frothy… it shouldn’t hurt.

“It’s not just this week [that] could prove troublesome,” he said. The recent overwhelming cold burst “is giving the polar ‘bears’ in the group a run for their money, particularly since complacency sounds like it got the better of them not so long ago.”

Because of the market’s shakiness, Levine said he is keeping support and resistance levels “wider than usual,” with support down at $7.000 and resistance up in the $7.600 area, followed by $8.000 and $8.250.

Commercial Brokerage Corp.’s Tom Saal said recent price moves have been exaggerated in both directions as futures traders conduct a delicate balancing act. “What we have in natural gas futures is a near record amount of open interest in the March contract. Even though it is not the end of the month, we probably have people who are either holding length or short positions wanting to get out of those positions early. They are probably looking to get out before the last couple of days, where things could be quite volatile. As a result, I think we have been seeing exaggerated moves in both directions.

“On Monday, the moderating temperature forecast six to 10 days out probably pushed a lot of people out of their long positions, which produced the 60.1-cent drop on the day for the prompt month. I think they probably came in Tuesday with the belief that they might have overdone it a little, so I think that is why we saw the small bump higher.”

Looking at the futures market in general, Saal said it appears to be conflicted. “Two things are going on here. We know we are going to pull quite a lot of gas out of storage over the next week or so, but the question is will we continue to see above-average withdrawals down the road due to lingering cold weather or is [groundhog] Punxsutawney Phil right and winter is over,” he said. “I think one of those two scenarios will probably play out, but until then it is a tug-of-war.”

As for support, Saal said he is also leaving a wide berth, with support at $7.120-7.140 and resistance up at $8. “I know it is a wide spread, but I think the market is capable of going up or down pretty easily here in the short term,” he said. “The weather has been tremendous. There is no getting around the fact that much of the country has been very cold.”

On Monday, the 11- to 15-day forecast pushed futures off a cliff. MDA EarthSat reported the major change. “A turnaround is forecast for the East after weeks of colder weather,” it said Monday. According to the forecaster, the American and European models have come into better agreement for above normals (temperatures) from Chicago to the East Coast [during] this period. “The European ensembles suggest the potential for a few days of much aboves [temperatures] in the East as well,” the forecaster said.

“Milder temperatures by early next week are expected to become prevalent across key metropolitan consuming regions. This development largely signals an end to the heavy storage withdrawals that will be seen within the next two EIA reports,” said Jim Ritterbusch of Ritterbusch and Associates.

He admitted that Thursday’s withdrawal report could approach a record level, but “even a decline in excess of 250 Bcf could be easily outweighed by further updates in the direction of milder trends that could potentially carry into the month of March. With this in mind, a significant amount of capital will likely be awaiting a bullish storage figure this week as an opportunity to establish short positions.”

Short-term traders see lower prices. “I look for $7 to hold for the next day or two,” said a New York floor trader. “There is a large withdrawal number expected on Thursday. If the number comes in less than expected, the market could trade to $6.50, and if it comes in as expected, it should hold $6.85.” He added the April contract looks a little “top heavy” and should “trade down to $6 sometime while it is spot.”

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