February natural gas futures shot lower Tuesday as some market watchers hypothesized that the slumping U.S. economy upstaged colder-than-expected temps in near-term weather forecasts. The contract recorded a low of $8.080 before closing out Tuesday’s session at $8.196, down 15.7 cents from Monday’s finish.

“We’ve been so bullish in the way this market has been trading. This is really the first real down day in a number of sessions,” said a Washington, DC-based broker. “It is hard to say after one day down that anything has really changed. However, whether we still have a move left in us to push this thing to the $9 top of our recent trading range remains to be seen.”

The broker noted that U.S. economic concerns could have had something to do with Tuesday’s fall. “I wonder whether some of the current economic woes could be hitting everything across the board” she queried. “Gold was down, crude was down, basically you name it and it was down Tuesday. The backbone that has really held everything up has been consumer spending throughout. All of a sudden you are starting to hear stories about companies laying people off and consumers not dipping as deep. Maybe that finally hit broadly across the market.”

Addressing Monday’s run higher, the broker said traders were surprised by the weather picture after the weekend. “When we walked in Monday the weather outlooks were not what we had been expecting. There was an awful lot of blue on the map,” she said. “Things were looking a lot colder with a number of regions looking at below-normal conditions. You also have to remember that when they’re calling for below-normal January temperatures, that means it’s going to be pretty cold. I think we would have kept pushing for higher prices if we didn’t get this weight from the economic news affecting a lot of the energies. With the weather forecast I can’t call the bull move dead, but it does look like traders paid attention to some other factors besides weather on Tuesday.”

She said support resides at $8, while resistance comes in up at $8.375 with significant resistance up at $8.712, which was the high on the perpetual chart from back on Nov. 2. “If we get above that, the high of the trading range up at $9 remains,” the broker said. “I don’t know if anyone thinks we are going much above that, but it is a possibility. If our pattern going back to 2006 is to be believed, then we would head lower again from there, so we will have to wait and see.”

Other market participants agreed that the bull move was not necessarily finished. “The natural gas market looks to be taking a rest after the rally of the past two weeks and possibly nothing more as temperature outlooks still look quite cold in the six- to 10-day period and perhaps somewhat less intense 11 to 15 days out,” said Tim Evans, an analyst with Citigroup in New York. “We’d certainly be surprised if the market were to completely reverse to the downside before this cold snap even fully arrives.”

Weather forecasts show a near-term moderation before brutal cold invades Midwest energy markets. Forecaster AccuWeather.com predicts a high in Chicago Wednesday of 38, seven degrees above a seasonal norm of 31, but by Saturday a high of only 10 is expected. Thursday night’s 16 degrees will feel like four below zero due to blustery winds, the forecaster said.

Traders suggest that the current supply surplus relative to five-year averages may soon dissipate. “Markets respond to dynamic rather than static factors, and the dynamic of a renewed narrowing in the supply surplus within the EIA [Energy Information Administration] reports to be issued on the 24th and 31st of this month will provide a further source of price support,” said Jim Ritterbusch of Ritterbusch and Associates.

He added that the price strength in the front of the curve, which has been intact since the beginning of this year, will likely be sustained going forward as cash prices are apt to flip from a discount to a premium to the nearby screen amidst the upcoming deep freeze. Ritterbusch looks for prices to advance toward the $8.500 area as the week progresses.

Analysts are wary of forecast cold. “We know there’s colder weather coming, and the last cold snap cut the surplus to the five-year average almost in half,” said a New York energy consultant. He added that the big drop in supplies reported in last week’s inventory report “really changed some people’s thinking” about price direction.

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