Despite overbought conditions and forecasts calling for warming temperatures, natural gas futures finished the week on a positive note Friday as traders bid the market higher in sympathy with cash prices that remain at a premium to futures. There also was apprehension of the release of potentially bullish storage data Thursday. However, the gains were a winter-month-only phenomenon, as advances in February and March were in sharp contrast to losses throughout the rest of the contracts.

February closed at $5.524, up 6.6 cents for the session. The final month of the winter strip — March — advanced 4 cents to $5.465. The 12-month strip, meanwhile, dropped 2.8 cents to average $5.003.

Temperatures were expected to moderate through the weekend for much of the eastern half of the country. The decreased heating load coupled with the diminished weekend industrial demand helped ease the tight supply-demand balance, and cash prices tumbled lower Friday. And although Henry Hub slipped a whopping 64 cents to average $5.92 Friday, it still was priced above February futures values. Traders polled by NGI agreed that the higher cash prices may have supported the futures market Friday. Even so, January cash and February futures are still roughly 40 cents apart with just two days until expiration.

Another supportive factor Friday was crude oil prices, which spiked on news from the White House Friday that Saddam Hussein may destroy his own oil fields if the U.S. attacks Iraq. March crude tacked on $1.03 to notch the month’s highest close ever at $33.28/bbl.

However, not all news was rosy for natural gas bulls last week. The latest six- to 10-day forecast released Friday by the National Weather Service calls for above-normal temperatures across most of the country for the first several days of February. Only the Southeast and South Central U.S. are predicted to see normal mercury readings.

And while warmer temperatures are inevitable sooner or later, Tim Evans of IFR Pegasus in New York points out that winter is far from over. “The natural gas futures market regained some of Thursday’s lost ground, as some private weather forecaster pushed back the arrival of warmer than normal temperatures from next Wednesday until Friday,” he wrote in a note to customers Friday. “There is also some speculation that the break in the temperatures may not prove all that long-lived.”

Looking head to this Thursday’s storage release, Evans notes that the withdrawal could approach the 253 Bcf pull seen under similar weather circumstances back in 2000. However, even if the draw falls short of that level, it will almost certainly dwarf both last year’s 112 Bcf decline as well as the five-year average decline for last week of 142 Bcf.

In daily technicals, support is seen in conjunction with the fairly steeply upsloping trendline drawn on the February daily chart, traders agree. On Friday, it gave the market support at $5.43, and for Monday the line comes in at the $5.46 level. Should the market break lower, it could find residual buying at last week’s low of $5.35. On the upside, resistance exists at Friday’s high in the $5.63 area. While weakness is possible early this week in the expiring February contract, buyers are not ready to write off the March contract, which will become the prompt month on Thursday when the storage number is released.

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