Traders appeared to be reassessing the severity and duration of current cold weather in the Midwest and East on Tuesday as January natural gas made a feeble attempt higher before falling. The prompt month settled at $13.489, down 17.1 cents for the day, which brings the two-day decline to 44.2 cents.

During the failed attempt higher in the afternoon, the prompt month travelled to $13.830, before slumping to carve out the day’s $13.370 low just before settlement.

Despite the two-day drop, January natural gas still retains most of its $2.297 run-up from last Tuesday to last Friday, which was based on cold weather fears. However, traders may have become more circumspect about the impact of the bone-chilling cold gripping the East and Midwest.

“Natural gas got close to the post-Katrina highs and we looked around and saw that there was no emergency,” said Steve Bellino, a trader at Fimat USA in New York. “It’s cold but not 0 degrees, it will need to get a lot colder to break the record.”

Although this week’s natural gas storage report for the week ended Dec. 2 will receive close scrutiny, expected withdrawals will not give as much insight to the weather and supply dynamic as next week’s report, which will be a much more accurate gauge of how well the industry will handle a cold winter during a period of reduced Gulf of Mexico production.

For the week ended Dec. 2, Kyle Cooper of Citigroup estimates that withdrawals ranged between 49 and 59 Bcf. Weather data confirms the likelihood of a nominal withdrawal. The National Weather Service reported that as of Dec. 3, the Mid-Atlantic (New York, New Jersey, and Pennsylvania) experienced 157 heating degree days (HDD), or 33 less than normal. The Midwest (Ohio, Indiana, Michigan, Illinois, and Wisconsin) was right at normal accumulations of HDD, or 217.

Although some forecasts are calling for moderating temperatures, Weather 2000 said arctic air continues to shock the nation and snow events are becoming routine. “If a ‘white Thanksgiving,’ well below normal temperature patterns and exceptional lake-effect snows were not startling enough, frigid readings (very cold for even February standards) have now hit several states,” the New York-based forecasting firm said. “Chicago didn’t climb out of the teen’s [Monday] afternoon. All 48 contiguous U.S. states hit sub-freezing temperatures [Tuesday] morning (16 states broke 0 degrees F), and Long Island NY is digging out of 6″ of snow…”

This week’s weather should change everything. “Weather forecasts obviously remain crucial. This upcoming week is indeed incredibly cold,” said Cooper. He noted that observed and forecast temperatures show that only two weeks of all of last winter will be colder than this week, yet he cautions that “Mother Nature will neither be bullish nor bearish forever.” Estimates of the withdrawal for the week ended Dec. 9 may fall well into triple digits, analysts say.

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