After a wild week of ups and downs as January futures traded between $4.328 and $4.637, traders on Friday took a bit of a break as the prompt-month contract traded in a tighter range and ended up closing the regular session at $4.417, down 1.8 cents from Thursday's finish but 6.8 cents higher than the previous week's close.

Some market watchers attributed the late-week price slide to the changes in the temperature outlook. "After attacking and finally closing above resistance at $4.500 earlier in the week, market bulls likely had the wind taken out of their sails by the warm-up in the forecast," said one New York broker. "The correction was also likely tied to the fact that some traders woke up to the realization that this market is still awash in gas."

While it is still expected to be cold in the East in the near-term forecasts, Citi Futures Perspective analyst Tim Evans said the market's slide was in response to the fact that it is not expected to be as cold as first thought.

"The natural gas market has seen a further moderate test of the downside in early Friday trade, with further disappointment with prices after Thursday's drop amid updated temperature forecasts that look more moderate," he said. "There are still some colder-than-normal temperatures ahead, but the trend in the forecasts since Wednesday has been toward less intense cold -- call it a bearish warming trend in the forecasts, if not the temperatures themselves."

Friday morning weather model runs showed that the cold in the East has actually turned the six- to 10-day outlook somewhat warmer. "Progression of some of the strongest cold into the 1-5 day [forecast] has turned this map [six- to 10-day] warmer. The key to watch in this time frame will be the next storm system developing over [the] south-central U.S. early," said forecaster MDA EarthSat.

It added that the storm system "should be somewhat suppressed by the strong blocking pattern, but an increase in moisture should limit the chill over the Midwest and eventually East as the period progresses...The next round of cold will begin to develop over Western Canada as high pressure settles in, with an eventual advancement southward expected."

"Fundamental impetus behind [Thursday's] selling is difficult to pin down given continued unusually cold temperatures within the six- to 10-day views," said Jim Ritterbusch of Ritterbusch and Associates. "Some shifts toward temperature moderation beyond next week are beginning to show up in some views, and this appeared to be sufficient to trigger [Thursday's] selling following release of the seemingly supportive storage figures."

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