Rescinding a portion of Tuesday’s losses, the natural gas futures market turned higher Wednesday as traders reacted to the latest forecast suggesting this week’s warm-up could be short-lived. The March contract closed at $5.356, up 3.7 cents for the session, but remained in the bottom half of its daily trading range. The out months fared better, led by the April contract, which gained 5.5 cents to close at $5.309.

It is often said that if you don’t like the weather, wait a minute. A more appropriate aphorism for the natural gas market this winter would add “for another forecast to be released” at the end. Although the cold weather in the eastern third of the country has been consistent, the forecasts have been anything but, with above normal temperature predictions interspersed with below normal outlooks.

A perfect example of this flip-flopping of forecasts is seen in the latest National Weather Service six- to 10-day outlook, which reverses previous outlooks (see Daily GPI, Feb. 18) by calling for below-normal temperatures for the entire Northeast quadrant of the country. Further out on the horizon, that cold air is expected to creep south of the Mason-Dixon line as below-normal mercury readings are seen as far south as Georgia and Alabama for the Feb. 26 to March 3 time frame.

Market-watchers agreed that the futures market would have reacted more vivaciously to these forecasts had it not had to contend with the pending release of fresh storage data Thursday morning. Market expectations call for a drawdown in the 150-178 Bcf area, which if realized would fall roughly between the five-year average of 114 Bcf and the year ago amount of 203 Bcf. Last week, the market shot 19 cents higher on the surprising news that a whopping 224 Bcf had been taken from the ground during the prior week.

However, even without another bullish surprise in this week’s storage data, the market probably will remain in its recent uptrend. “Spending the day trading in the $5.30 range doesn’t support this bullish outlook very well, but the bullish scenario won’t be invalidated unless gas trades below $5.16,” said Craig Coberly of GSC Energy in Atlanta. “Based on this premise, the outlook is for gas to start moving away from the $5.30 area and over the next several days prices are expected to exceed $5.63 as gas moves to the calculated objective of $6.05.”

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