After coming out of the gates lower following the Wednesday night Access trading session, February natural gas used Thursday to tread water as the weather and storage situations continue to play out.

Trading within a fairly tight range for a second consecutive day, the prompt month settled at $6.308, up 1.5 cents on the day. With the cold weather forecasts in the East moderating, a number of market watchers said futures appeared to be simply passing time ahead of Friday’s natural gas storage report.

“On the weather alone, I don’t think futures should hold up,” a Washington, DC-based broker said. “Thursday’s trading range proved that the day’s trading was pretty boring. If crude were able to significantly break to the downside, I think natural gas futures could give way and push back down to the $5.70s. If crude goes back into rally mode up to $50, then I don’t know whether gas would be able to sell off as hard as it might want to, considering the lack of extended cold weather.”

The broker noted that he does not believe that the winter weather has eaten into storage enough for futures to go higher. “I would still be a structural bear on natural gas futures into spring,” he said. “I think we will continue to work lower into that $5.70 level, barring some form of geopolitical move that would send the crude up and give natural gas support. I don’t know how much lower than $5.70 we would really go on a good flush. If you took the geopolitics out of it, and we were only trading on weather, I think we would certainly work lower, but not down into the upper $4 level by any means I don’t think.”

The broker said he expects Friday’s storage report for the week ended Jan. 14 to reveal a 102-112 Bcf withdrawal, which pales in comparison to the 133 Bcf five-year average withdrawal and the 155 Bcf year ago withdrawal (see Daily GPI, Jan. 20).

“If we get a report anywhere in the double digits I think that regardless of what crude futures are doing, February natural gas will really push back down into the $5.70s,” the broker said.

According to Jim Ritterbusch of Ritterbusch and Associates, moderating temperatures and a possibly bearish inventory report could well thwart the best laid plans of the bulls. “The outlook for the Midcontinent region through next week is looking increasingly bearish as a pattern of above normal temperatures spreads further toward the Ohio valley,” he said. “With no fresh Arctic blasts on the horizon and with winter proceeding into its second half, the weather (price) premium will diminish daily.”

On the storage watch, Ritterbusch said, “We will be looking for a withdrawal of 108 Bcf while most industry ideas concentrate within the 100-105 Bcf zone… However, the range of expectations again varies widely and significant surprises are possible.” He continued that even though the market shrugged off last week’s seemingly bearish data (an 88 Bcf withdrawal), a draw of less than 100 Bcf in tomorrow’s report could elicit a bearish response.

The Energy Information Administration’s storage report will be released on Friday morning between 10:30 a.m. and 10:40 a.m. (EST) due to the presidential inauguration on Thursday.

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