As much of the eastern half of the country continued to freeze, natural gas futures bulls on Tuesday were a little skeptical of making another run to the upside so soon after the March contract was rebuffed by the psychological $8 level in overnight trade on Sunday. On Tuesday, the prompt month traded within a $7.460 to $7.730 range before settling at $7.616, down 1.8 cents from Monday’s close.

Looking at the market on a grander scale, enerjay LLC broker Jay Levine said that while the price declines earlier this winter were “fundamentally justified” at the time, they likely discounted the potential for “trouble” — in this case extreme widespread cold — in an exaggerated manner. “Put another way; the market wasn’t nearly as bearish as prices had suggested…just as they weren’t that bullish not so very long ago with prices firmly in the double digits with many having visions of $20 natural gas and $100 crude,” Levine said. “And, until very recently, I’m sure many were thinking natural gas had a better chance of seeing $2 and not $20. What’s a zero and a decimal point amongst friends?”

Looking at the next move in natural gas futures, Levine noted that traders currently have their eyes “glued to the Weather Channel” for guidance. “Storage may have fallen short of the mark last week with a 186 Bcf withdrawal — even though it compares favorably with [year-over-year levels] — and it probably won’t come as a surprise if the next few releases set a record or two either,” the broker said. “That in itself is not reason to expect this recent rally to continue — although sentiment could just as easily take wild control and completely disregard existing supply…”

While Levine said storage withdrawal estimates from the industry for the week ended Feb. 2 seem to range from 195 Bcf to 225 Bcf, he is personally expecting a 230 Bcf pull from underground stocks.

Calling the market narrowly range-bound, Levine said he sees resistance at $8.135, $8.250, $8.650 and $9.250. As for support, the broker pointed to $7.375, followed by $7.025, $6.725 and then $6.450.

AccuWeather said Tuesday that the majority of the eastern half of the nation was enduring more brutal cold and lake-effect snow downwind of the Great Lakes. The forecasting firm added that an Alberta Clipper was expected to spread snow from the northern Plains across the Midwest into the mid-Atlantic states. After frigid air from the depths of the Arctic took hold of the East on Monday, extending into the Southeast, the core of the bitter cold was still gripping the northern Plains, Midwest and Northeast, resulting in the coldest temperatures in several years, according to AccuWeather.

“The extremely cold weather will continue [Tuesday] across the Great Lakes and Northeast as arctic air continues to hold a firm grip on the region. West-northwesterly winds will combine with the cold temperatures to keep it feeling like it is zero or colder for much of the day across New England, upstate New York, Pennsylvania and Michigan,” said Brian Frugis, a meteorologist with AccuWeather. “Even along the coast, abundant sunshine will do little to help, as it will feel as if it is in the single digits or colder throughout Tuesday. This cold wave will continue throughout the entire week, with temperatures remaining below normal through Saturday.”

Cold weather this week is forecast to smother major energy markets. The National Weather Service forecasts above normal accumulations of heating degree days (HDD) for the Mid-Atlantic and industrialized Midwest. New York, New Jersey and Pennsylvania are expected to shiver under 326 HDD, or 69 more than normal, and Ohio, Indiana, Michigan, Illinois and Wisconsin will be forced to endure 386 HDD, or 105 more than normal.

One forecaster said that major energy markets will begin to climb out from the numbing cold by the middle of this week. “Chicago will slowly emerge from its first real encounter with cold in winter 2006-07 by midweek, after what could be as many as five straight days with subzero readings,” said Steve Kahn, WGN Weather Center meteorologist in Chicago.

AccuWeather predicts that Chicago will see a high of 18 degrees Wednesday gradually increasing to 24 next Wednesday. The normal high is 33 degrees. Philadelphia is expected to see a high Wednesday of 27 increasing to 40 the following Wednesday. The normal high in Philadelphia is 40 degrees this time of year, the forecaster said.

Walter Zimmerman of United Energy said that $7.935 is a key resistance point to establish market “peaking action” from which prices would be poised to move lower. For the bears to more fully establish control, “peg $7.490 the first hurdle for the bears as the 0.236 retracement of the entire $5.740 to $8.035 rally.”

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