March natural gas futures continued to rebound Tuesday as traders began their individual expiration dances ahead of the contract’s termination Wednesday. The prompt-month contract pushed higher late in the regular trading session to close at $4.236, up 13.9 cents from Monday’s finish.

Citi Futures Perspective analyst Tim Evans said the natural gas market was experiencing “some expiration-related trade” as the March options contract expired Tuesday. However, the analyst said he is not sure the strength in the market can continue.

“We think there may also be some hedge buying in the mix as New York natural gas distributors [are] selling physical [gas] at big $1.50-2.00 cash premiums to the futures and then replacing those units from the cheaper futures market,” he said. “Overall, however, the weather outlook remains little changed from a day ago, and relatively benign, with warmer-than-normal temperatures coming to the central and eastern U.S. limiting heating demand.”

Evans noted that Frontier Weather’s six- to 10-day forecast covering March 1-5 calls for above-normal temperatures from the Southwest and central Rockies to the Gulf Coast and the Appalachians, with mostly normal readings elsewhere. In the 11- to 15-day forecast period covering March 6-10, temperatures are expected to average cooler than normal west of the Rockies and above normal east of that divide.

Following last week’s shocker that a measly 24 Bcf was removed from underground natural gas storage for the week ended Feb. 13, Evans said he expects natural gas withdrawals to rebound in fine style in this Thursday’s report for the week ended Feb. 20. His early estimate is for 130 Bcf to be removed from inventories, which would still be significantly short of last year’s 157 Bcf draw and the five-year average pull of 145 Bcf.

Other analysts also noted that hedge buyers seem to be in the driver’s seat, and stabilization of natural gas prices or change in price direction will require hedge buyers to step to the plate as they perceive a change in price environment. “The gas market continues to be pressured by weak commodities in general, slowing industrial demand and the lack of forward buying interest by the hedge buyer,” said Mike DeVooght of DEVO Capital Management, a Colorado-based trading and risk management firm.

DeVooght admitted these have been tough times for sellers. “On a trading basis, we have been looking for (or hoping for) some type of weather-related rally to give us a chance to do some selling in the summer strip.” Price rallies, which could be used as selling opportunities, have been virtually nonexistent and DeVooght is left with the unenviable option of selling market lows.

“If we do not get a rally soon (by the time our winter floors expire), we will look at establishing some floors and/or collars in the near future. If you are on the edge of your production cost levels, you should consider buying some slightly out-of-the money puts just in case this market does not give us a rally to establish a position at a more attractive level,” he said.

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