Stemming the price slide that left the February contract down 41 cents Monday, natural gas futures rebounded Tuesday as traders were once again put in a buying mood by bullish weather outlooks.

After watching a wave of long liquidation that failed to fill in a key gap on the daily chart Monday, buyers stepped back into the fray Tuesday. Not only did February gain 19.2 cents to close at $5.127, but it also notched a higher high and higher low for the day. An early test of Friday’s $5.21 low is expected Wednesday.

In a stunning revision of bearish and neutral forecasts released Sunday and Monday respectively, the National Weather Service Tuesday called for an enormous swath of cold air to envelop the entire eastern half of the United States for the five-day work week Jan. 13-17. Most of the West, meanwhile, will see seasonal temperatures, save the Southwest, which will continue to experience warmer than normal mercury readings.

“All of this cold air comes courtesy of the polar vortex over the Hudson Bay,” adds Weather 2000 in a note to its customers Tuesday. “Helping with this intensification is high pressure over Greenland, which will also act to block any eastward movement by the polar vortex. High pressure ridging over the Rockies will work with the Greenland Block to further strengthen the Hudson Bay vortex and keep it in place over the next two weeks….[This] will be some of the coldest and most persistent Canadian air that January has seen in several years,” the New York-based group predicted.

That forecast released Tuesday served to reinforce the bullish forecast put out last Thursday by esteemed industry meteorologist Jon Davis of Salomon Smith Barney (see Daily GPI, Jan. 3). The February contract advanced more than a half dollar late last week on the news. Then, sensing that the rally was overdone, sellers liquidated long holdings Monday, producing a 40-cent price downdraft.

From a technical perspective, however, Monday’s sell-off was not a home run for bears. By notching a $4.85 low for the session, sellers had come close but failed to completely fill in the Dec. 31 to Jan. 2 chart gap down to $4.83. As it turns out, that level again became a target Tuesday, but in similar fashion buyers stepped in to arrest the price slide, and February only reached a low of $4.88.

Noting that the market is now well above that level of support, Tim Evans of IFR Pegasus sees key support in the $5.05-06 area, “which has functioned as a pivot over the past two weeks.” The $5.20-23 area now appears in buyers’ sights, with highs at $5.42-47 not out of the question. “If the market can clear those hurdles, then spot resistance at $5.53-55, $5.71 and $5.90-6.00 become the next series of objectives,” Evans wrote in a note to customers Tuesday.

However, in order for the natural gas market to move higher, it will first need to get past some potentially bearish storage news set to be released by the government Thursday morning. Expectations for that report are focusing on a withdrawal in the 100-120 Bcf range, which if realized would not only fall well below last year’s 199 Bcf draw, but also short of last week’s lower-than-expected 123 Bcf takeaway. The five-year average withdrawal is 157 Bcf.

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