Forecasters finally are saying that Old Man Winter soon may be forced into retirement, and that news brought gas futures bears out of their caves on Monday. April futures staged a sharp reversal, opening 34.2 cents lower Monday morning and ending the day at $6.515, down 47.8 cents.

The high for the day was only $6.72, way down from Friday’s high of $7.110, and the low was $6.480.

The National Weather Service’s six- to 10-day and eight to 14-day forecasts put downward pressure on the market and helped trigger the sudden drop. The six- to 10-day forecast showed warmer than normal temperatures for the entire eastern United States with below normal temperatures over the lighter demand areas in the West. And the eight- to 14-day forecast called for the entire northern half of the country to be warmer than normal with the southern half seeing below normal temperatures.

The bearish weather forecast enabled April futures to bust straight through support at last Thursday’s low of $6.69, confirming what several brokers had been expecting late last week. They had called for a fairly rapid pull back, possibly to the low $6.00s area.

Cynthia Kase of Kase and Company said on Friday that such a sharp decline “could bring April down to the low $5.00s. “Kase said the market may either decline slowly, testing each and every support point “or merely free fall.”

“A key level is, of course, the even $6.00 area, and increasing in importance in this week’s analysis is a price of around $5.30. Initial support for May is about one dollar lower than that for April at $5.62. A break to new lows biases this contract to $4.87.”

Kase said the odds favor the backwardation continuing to narrow, and in fact the April-May spread fell to 35 cents Monday from 69 cents on Friday and $1.21 last Monday. While April futures fell 47.8 cents Monday, May and June dropped 13.8 cents and 10.8 cents, respectively. Kase said the out-months may be posting gains again in the days ahead, while the near-month contract continues falling.

However, both broker Jay Levine of Advest Inc. and analyst Tim Evans of IFR Pegasus said Monday that they aren’t yet convinced that the steam is all gone from this market. Levine said he’s even heard mixed weather forecasts. Lingering cold and another large storage withdrawal this week could easily change the picture by Thursday.

“My weather guy is still of the belief that much of March is going to stay unseasonably cold in the Northeast, and that in itself leads me to believe that the downside is somewhat limited in the short term even though it took it on the chin today,” said Levine. “My belief is that natural gas has good support anywhere between the mid- to high $6.40s down to $6.20. Technical support is very good down to $6.20. Should natural gas for April delivery break $6.20, I think it’s a problem, and you can perhaps safely say, in my opinion, ‘it’s over.’

“Until that happens, I’m going to say the market still has an underlying bullish tone to it, most probably because of the storage situation, which is not about to go away anytime soon,” Levine added.

Based on heating degree day accumulations for last week, which came in higher than originally forecast, Evans raised his prediction for this week’s storage withdrawal to 130-160 Bcf, which compares with 91 Bcf for the same week last year and the 63 Bcf five-year average withdrawal. Tom Driscoll of Lehman Brothers is forecasting a 135 Bcf withdrawal. Kyle Cooper of Salomon Smith Barney said he’s expecting a 140 Bcf draw. If 140 Bcf is taken from working gas levels in this week’s report, it would leave storage only 1 Bcf higher than its record low set in April 1996, setting the stage for extremely low season ending storage levels. There are still at least three weeks left in the traditional storage withdrawal season.

“The fundamentals may not be as bullish as if it were cold, but this remains a very tight market, vulnerable to short covering,” said Tim Evans. However, he believes the market make take a much needed breather for a couple trading sessions before making its next move, which Evans predicts will be another jump higher.

“This environment is obviously a very treacherous one, and it’s one in which people have to tread very cautiously and that’s the bottom line right now,” said Jay Levine.

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