Besieged by a deteriorating fundamental picture in a market that is already firmly entrenched in a downtrend, natural gas futures traders pressured prices to new lows yesterday, amid a seemingly relentless barrage of selling activity. Even the season’s first triple-digit storage withdrawal (124 Bcf) failed to induce much of any buying sympathy, giving traders little choice but to continue to short the market. The February contract closed 19.7 cents lower at $2.268 and in doing so broke its previous all-time low at $2.415 notched back in February 1999.

According to the AGA, 28 Bcf and 12 Bcf were withdrawn from the Producing Region and the Consuming Region West, respectively, with the Consuming Region East accounting for the remaining 84 Bcf. In addition to falling short of most market-watcher predictions, the net withdrawal of 124 Bcf was well below last year’s 209 Bcf figure. By comparison, the five-year average withdrawal for last week is 146 Bcf. Underground storage facilities in the U.S. are now 87% full at 2,856 Bcf. Over the past eight weeks, the year-on-year storage surplus has increased from 352 Bcf to an all-time high, 1,127 Bcf, and during that time the February contract has tumbled more than 80 cents.

Also influencing traders’ decisions yesterday were revised weather forecasts calling for moderating temperatures for the eastern half of the country as early as this weekend. And while most forecasters call for temperatures to cool right back down early next week after the swath of warm air passes, they admit it will not be as cold as it was this week. According to the latest six- to 10-day weather forecast released Thursday by the National Weather Service, above-normal temperatures are expected across a large upside-down-triangle-shaped area covering roughly the middle third of the country. In fact, the only below-normal temperatures are expected in the southeastern U.S., where people Thursday were digging out from a rare snowstorm.

In daily technicals, February is in uncharted territory now that it is carving out new lows. Because of that, chartists are forced to look to the continuation chart to find the next support levels. For Tim Evans of New York’s IFR Pegasus the market is “in a precarious position,” with the next possibility for support down at the $2.17 low achieved in late November by the expiring December contract. Lower still is psychological support at $2.00 and the $1.76 low posted by the October contract on Sept. 26, which Evans feels could become targets, “in spite of the fact that it’s winter.” Meanwhile, he targets resistance at last Friday’s $2.785 high ahead of the $3.034 peak from Dec. 26. Evans is currently riding a short position from an average $2.89 entry, but is wary of a rebound. Because of that, he has lowered a buy stop down to $2.56 to lock in a 33-cent profit.

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