In what might be yet another round of “buy the rumor, sell the fact,” natural gas futures traders pushed the February contract lower on Wednesday despite the fact that the freezing cold weather forecasted weeks ago was finally coming to fruition for much of the United States. The prompt month put in a low of $6.200 before closing at $6.234, down 40.4 cents on the day.

“I think the technicals are a little bearish and they will likely be that way for a short period of time,” said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami. “The other thing you have to look at is while a majority of the United States was cold Wednesday, the cash market wasn’t going through the roof. Cash traders are basically saying that there is plenty of gas in storage to handle this little cold snap. While gas demand is definitely out there, we know people were pulling from storage instead of buying on the market on Wednesday because the cash market just wasn’t that strong on the day.

“In the near term, I think the bearish case holds sway,” Kennedy added. “In addition, we are not going to see a big withdrawal Thursday for the week ended Jan. 12 because it was warm last week in most places. Over the next week, the bears will likely be in control. However, if we see a large withdrawal in the report next week compounded by eight- to 14-day forecasts calling for the cold weather to stick around, then I think the futures market will sit up and pay attention.”

Noting that trading on Wednesday reached his first support target at $6.200, Kennedy said the next level is down at $6.100, followed by $6.030.

The recent cold snap was impacting millions of people from California to Texas to Maine — and most places in between — as snow and ice storms left a couple of hundred thousand homes without power. Some respite might be on the way for the West. In its most recent six- to 10-day forecast, AccuWeather shows below-normal temperatures extending across the entire U.S. east of a line from eastern Minnesota to West Texas. Utah, Idaho and Nevada and points west are forecast to enjoy above-normal temperatures.

Traders began Wednesday’s session assessing the technical selling opportunity while discounting the bullish weather outlook. Some analysts believe the market is not headed anywhere anytime soon. According to a Bloomberg survey, natural gas futures are likely to stay at current levels. A Jan. 12 poll of 21 traders and analysts showed that 10 expect futures to be little changed this week. Six said prices will rise and five expected them to drop.

Jay Levine, a broker with enerjay LLC, said cold weather might be the only thing that could prop up falling gas prices. “The complex continues to struggle finding support,” he said, noting that the market is having trouble finding “any reason to advance, much less maintain, current prices.” However, Levine added that the current cold could be enough to “wake things up…even if fundamentals remain unchanged, fundamentals being the Queen Mary of analysis.”

Turning attention to Thursday morning’s natural gas storage report for the week ended Jan. 12, most expect the Energy Information Administration to report a withdrawal within the low 70s Bcf to high 80s Bcf range. A Reuters survey of 18 industry players is looking for a median draw of 83 Bcf, while the ICAP storage options auction held Wednesday afternoon produced an 80.5 Bcf withdrawal expectation. The number revealed Thursday morning will be compared to last year’s date-adjusted 42 Bcf withdrawal and the five-year average pull of 119 Bcf.

Golden, CO-based Bentek Energy is expecting a 80 Bcf pull using its Flow model and a 71 Bcf withdrawal using its Supply/Demand Balance model. Either way, Bentek said total stocks are expected to drop below 3 Tcf for the first time this heating season. Stocks are still 16% above last year.

Breaking down the Flow model’s 80 Bcf withdrawal, Bentek sees a 50 Bcf withdrawal in the East region, a 16 Bcf withdrawal from the West region and a 14 Bcf withdrawal in the Producing region. Bentek said its Supply/Demand Balance model projection of a 71 Bcf withdrawal is due to a 23 Bcf increase in demand during the week while production was relatively flat. The company added that Mexican exports increased as did liquefied natural gas imports.

“From this week last year until the first of April, stocks declined by a total of 886 Bcf, or about 80.5 Bcf per week,” Bentek said in its most recent Natural Gas Storage Outlook. “If this year tracks that same rate of decline, stocks for the withdrawal season would end at 2,108 Bcf, or almost 24% over last year’s historically high inventory level.”

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