Putting in a relatively quiet trading session, February natural gas futures, which expires Friday, opened 13.2 cents lower Wednesday at $8.550 and kept within a tight 19-cent trading range between $8.420 and $8.610 on the day before closing at $8.460, down 22.2 cents.

Lack of a definitive weather picture for February tied with anticipation of Thursday morning’s natural gas storage report helped the prompt month to continue its recent sideways pattern on Wednesday.

“We’ve gone from the clear downtrend that we had going from late December to more of a sideways chop,” said Tim Evans, an analyst with IFR Energy Services. “The market has tried to get a technical correction to the upside organized on talk of colder weather, but then it turns out the weather will remain mild, so we slip back to tease at a new low, but we can’t hold that either.”

While things have been moving sideways, Evans noted that 50-cent ranges like the one Tuesday can still be dangerous. “In today’s market, we sort of laugh off a 50-cent range as being pretty small, but you have to remember 50 cents is still $5,000 a contract,” he said. “That is still a big deal with a lot of money changing hands. In the late 1990s, it would take you three months to move 50 cents. Now it is three hours. We really are in a whole other game.”

Looking at the rest of the heating season, Evans said the big fundamental picture is still bearish — both in terms of the weather pattern and the likely build-up of storage. “Even if we get average withdrawals for the balance of the heating season, we still may be looking at a record storage level for the end of March,” he said. “In addition, if you look at the year-on-year comparison for natural gas prices, we are still some 30% higher than a year ago. How can we continue to hold that premium when we have a storage surplus relative to last year?

“From a fundamental standpoint, there still may be dollars of downside risk here. From a technical perspective, it does look like we have lost a lot of downward momentum. We may be able to organize a short-term correction to the upside, but I would be very surprised if it manages to recapture 50% of what we have lost from that $15.780 high. Could we get to $10? Maybe with a stiff tailwind, but if you blink, you could miss the entire correction.”

Taking a peek at this week’s natural gas storage report analysis for the week ended Jan. 20, Evans said he is calling for a withdrawal from 85 Bcf to 95 Bcf. “My estimate is going straight off the change in temperatures from week to week,” he said. “From my perspective, an industry consensus below 90 Bcf suggests that there is the potential for a bullish surprise. I think there is a greater chance the number will be north of 70 Bcf than south of 70 Bcf.”

Golden, CO-based Bentek Energy said it expects a 73 Bcf withdrawal, resulting in 2,502 Bcf of gas in underground stores. “This level is 22.1% above the five-year average and 0.5% above the five-year high,” Bentek said. The company’s estimate for the week includes a 50 Bcf withdrawal from the East region, with pulls of 12 Bcf and 11 Bcf, respectively, from the West and Producing regions.

Wednesday afternoon’s ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, zeroed in on a 76.5 Bcf withdrawal for the week. The number revealed Thursday morning by the Energy Information Administration will also be compared to last year’s 213 Bcf withdrawal and the five-year average withdrawal of 165 Bcf.

Looking at the overall natural gas futures screen, market technicians do not see conditions in place that would enable natural gas prices to rally off recent lows. “The only bullish thing that can be said about Tuesday’s price action is that it did not make a new low,” Walter Zimmerman, vice president of United Energy, said Wednesday morning.

Technicians like Zimmerman often model market moves as advances (or declines) followed by a retracement in the opposite direction. The most recent decline, from the February contract’s high Friday of $9.44 to the low of $8.310 Monday, is just such a market move. One of the key figures followed by technicians is the 0.618 retracement, and such retracement levels often act as support and resistance areas for further market advances or declines.

“Tuesday’s rally fell back from a failure into the 0.618 retracement of the most recent decline from $9.440 to the $8.310 low,” Zimmerman pointed out. Thus, of the $1.13 decline, the February futures failed to advance to $9.01 or 0.618 of that move, where resistance held.

Zimmmerman admitted he might be “too hasty with the bearish judgment. However, to have any case the bulls need to produce at least a close above $9.200 as 0.7862 of the $9.440 to $8.310 decline.”

Near-term weather prospects do not appear helpful to the bulls’ case either. AccuWeather.com forecasts that New York City next week will put in a high of 44 degrees on Monday and gradually cools down to 38 by Friday. The normal high in New York City for late January is 38. Chicago is also forecast to be above average. Monday’s Chicago high of 36 retreats to 34 by Friday, but the average late-January high for the city is 31, the forecaster reported.

Floor bulls are morose. “Funds continued to sell the March contract. This market looks heavy, and it can’t sustain a rally,” a New York floor trader said Wednesday morning.

Others are willing to go long, but at lower prices. Phil Flynn of Alaron suggests buying March natural gas futures at $8.03 with a stop loss order at $7.97.

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