Since becoming the prompt contract a month ago the February natural gas futures contract has exhibited a strong tendency to rebound following each and every price dip. That was again perfectly demonstrated Tuesday on the month’s penultimate trading day as market-on-close buying lifted the contract off its late afternoon low at $5.33. February closed at $5.444, up 4.8 cents for the session and 11.4 cents off its low notched just 15 minutes earlier.

“This market has had good support in the mid $5.30s and we saw the buying there again today,” a Houston trader commented. “There is just too much to chance to be short this market.”

President Bush was scheduled to deliver a State of the Union address to the country Tuesday night and give his rationale for military action against Iraq. With that hanging in the balance Tuesday, traders of both natural gas and oil were reticent to go home for the evening with any sort of sizable short position. March crude oil futures finished 38 cents higher at $32.67.

Also causing a fair amount of trepidation Tuesday was the uncertainty surrounding the Thursday release of fresh natural gas storage data. Expectations call for a near record-setting 225-245 Bcf withdrawal, which would not only more than double the year-ago figure of 112 Bcf, but also better last week’s whopping 210 Bcf takeaway.

But even if the market continues to draw down storage at an average or even greater-than-average clip, Kyle Cooper of Salomon Smith Barney sees ending inventories no lower than 900 Bcf by March 31. Specifically, he looks for a 235-45 Bcf pull this Thursday, followed by a less than 200 Bcf drawdown to be released next week. Going forward, Cooper calculates that if the market pulls gas this year at its average February and March rates of 398 Bcf and 201 Bcf respectively, it will end the heating season with no less than 900 Bcf.

However, the market will have to wait until Thursday morning for its next piece of storage data. In the meantime, traders will be focused on the February contract, which is set to expire Wednesday afternoon at 2:30 p.m. EST. Had the market not rebounded so buoyantly Tuesday, bears would be smelling blood and would expect a further retracement into the $5.10s Wednesday. However, by bouncing off support in the mid $5.30s, the February contract was able to close above an upward sloping trendline on the daily chart. If the market fails to crash Wednesday, traders will likely look to dump March lower on its first day as prompt contract Thursday.

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