Physical gas for delivery Tuesday took a page from futures and traded lower overall, with New England posting the greatest losses.

Only a handful of points escaped the market's cleaver, and most locations experienced double-digit drops. Losses at a couple of New England points were upwards of $10, but hefty declines were seen in the East as well as California. At the close of futures trading, January had lost 7.2 cents to $4.279 and February was down 6.4 cents to $4.286. January crude oil rose 88 cents to $97.48/bbl.

Weather forecasts called for a slight warming trend by midweek, but New England and eastern points seemed more impacted by plummeting power prices than near-term weather outlooks. predicted that Boston's Monday high of 30 would slide to 27 Tuesday before reaching 34 on Wednesday. The normal mid-December high in Boston is 41. Hartford, CT's Monday maximum of 30 was expected to slip to 25 Tuesday before warming to 33 on Wednesday. Providence, RI's Monday high of 31 was anticipated to fall to 29 Tuesday before reaching 33 Wednesday. The seasonal high in Providence is 42.

The National Weather Service in southeast Massachusetts forecast snow in the region Tuesday. "[H]igh pressure builds across New England tonight...A fast-moving low-pressure system will bring accumulating snow to the region Tuesday into Tuesday evening. Dry but chilly and blustery weather follows Wednesday behind the departing low. Dry weather continues Thursday and not as cold as high pressure slips south of New England. Milder weather Friday then potentially unsettled late Friday into the weekend as a frontal system enters New England."

Power prices trumped near-term weather. IntercontinentalExchange reported that peak power Tuesday at the New England ISO's Massachusetts Hub dropped a precipitous $70.88 to $178.12/MWh, and next-day power at the PJM West Interconnect fell $8.30 to $48.11/MWh.

Quotes for Tuesday gas at the Algonquin Citygates skidded $10.09 to $23.05, and gas upstream at Iroquois Waddington fell $2.30 to $14.07. On Tennessee Zone 6 200 L Tuesday parcels tumbled $9.84 to $22.91/MWh.

Farther south the declines weren't quite as steep. Tuesday gas on Dominion fell 13 cents to $3.50, and on Transco Leidy next-day deliveries were seen at $3.28, up 17 cents. Tetco M-3 Delivery was off 63 cents to $5.18, and gas into New York City on Transco Zone 6 tumbled 29 cents to $6.91.

A forecast warm start to the week was enough to pressure next-day gas prices on the West Coast. "After highs tapped out in the lower 80s on Monday, Tuesday will stay in the upper 70s, likely just falling short of the 80-degree mark," said's Samantha-Rae Tuthill. "Skies will be mostly sunny after some low morning clouds are burned away by the daylight and a few lingering clouds pass by from time to time.

"A change will begin by Wednesday, however, when skies will be mostly overcast. The high temperature for the day will likely not climb out of the upper 60s. Thursday's temperature will fall even further, struggling to maintain 60 degrees as an afternoon high. Showers will be likely in the afternoon as the sky stays mostly cloudy through the overnight."

Lower power loads and prices also helped soften prices. The California Independent System Operator reported that forecast peak power loads for Tuesday were expected to drop to 31,775 MW from Monday's 32,139 MW.

IntercontinentalExchange disclosed that Tuesday peak power at NP-15 fell $4.53 to $49.47/MWh and at SP-15 peak power shed $3.79 to $49.46/MWh.

Gas deliveries to Malin fell 19 cents to $4.31, and Tuesday deliveries to the PG&E citygates dropped 16 cents to $4.50. Gas at SoCal citygates shed 16 cents to $4.52 and packages at the SoCal border were seen 14 cents lower at $4.41.

Futures traders noted that the bellwether March-April spread took an ominous fall. "It's down almost 6 cents to 12.20 [cents bid] at 12.40 [cents offered]. That's a pretty big deal. A lot of people trade that spread," said a New York floor trader on Monday.

"Whatever the high today [$4.318] is going to be resistance for tomorrow, but we have been through these numbers already. The downside ultimately will be around $4.20 and the upside $4.40."

It was his assessment that the large drawdowns estimated for Thursday's storage report were already in the market. The Energy Metro Desk (EMD) Early View Storage estimate for next week showed an average of 256 Bcf from a survey of 17 traders Friday. The range on the survey was from 200 to 280 Bcf. Last year, 82 Bcf was pulled and the five-year average is for 135 Bcf, according to EMD.

The weather outlook took a big turn over the weekend. "The big story today is the significant reduction of the Christmas week cold outbreak as we are now only seeing some weak transient cooling with more variability for a much-reduced demand impact," said Matt Rogers, president of Commodity Weather Group, in the firm's Monday morning outlook.

"This is leading to a demand drop of as much as 25-35 heating degree days from Friday's expectations on the same forecast days. Despite this massive moderation for next week, the modeling is still not keen on completely flipping the Pacific pattern, so the eastern 'gatekeeper' ridging continues to prevent a big sustained warm situation from dominating yet. More transient/weak cool pushes are still seen translating through the pattern in the 11-15 day range, but given what happened last week, we are more cautious with the duration and intensity of upcoming cool to cold pushes through the Central to Eastern U.S."

Industry consultant Genscape reported moderating temperatures have increased production. "Freeze-offs in the Midcontinent have declined and allowed production levels to increase. Freeze-offs impacted as much as 1.5 Bcf/d of production last week. The impact has started to wane as weather forecasts project warmer weather in the coming few days," it said in a morning report to clients.

Risk managers see current price levels as selling opportunities. "Colder-than-normal temperatures and aggressive short-covering by speculators has been dragging the market higher. Even a smaller-than-anticipated draw in the weekly storage number failed to push the market lower this past week," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. "We've seen a nice rally, but after the shorts get done covering and temperatures warm up, it is going to be difficult for the natural gas market to hold its recent gains above the $4 level. We would use rallies approaching the mid $4 level as a selling opportunity.

DeVooght suggests that traders sell February $4.50 calls at 20 cents, and he also sees an opportunity selling March futures at $4.40 to $4.50. End-users should stand aside, and those with exposure to lower prices should continue to hold short the remainder of a short November-March strip initiated earlier at $4.50 to $4.60 and also sell the April-October strip at $4.30 to $4.40.

Tom Saal, vice president at INTL FC Stone in Miami, noted major technical resistance at $4.444, "and selling showing up in back years. Cal' 15, Cal' 17 and Cal' 19."