Despite cold weather in the Mid-Atlantic and Northeast and associated up ticks in physical gas prices, natural gas futures slid lower Monday in another in a growing string of lackluster trading sessions. After pushing prices lower in the morning, local traders covered their shorts in the afternoon when it became apparent a close below $5.00 was not in the cards. May finished at $5.06, down 8.6 cents for the session. At 42,486, estimated volume was extremely light.

After slipping nearly a dime Friday, several market watchers were looking for a little short-covering rally Monday. However, it wasn’t until cash prices were on their way to notching double digit gains that the futures market turned around. Unseasonably cold weather was seen across much of the east Monday, with flurries flying for the second day in a row across parts of the Mid-Atlantic. A surprise storm dropped a foot of snow and closed schools in western North Carolina and south and central Virginia on Sunday. However, it will be a quick thaw and melt for those areas as temperatures are expected to moderate back into the 70s by midweek.

Those warmer temperatures will not be the only bearish factor this week. Also likely to depress prices is the weekly storage report from the Energy Information Administration. Citing mild weather last week and a modest accumulation of degree days heating, Thomas Driscoll of Lehman Brothers in New York calls for a 30 Bcf refill to be announced Thursday. Looking even further ahead, Driscoll estimates next Thursday’s storage report (covering this week), will feature a 20 Bcf injection. Because 70 Bcf was withdrawn last year during those two weeks, Driscoll’s estimates — if correct — would result in a 120 Bcf decrease in the year-on-year deficit currently at 918 Bcf.

On the technical side of the market, the news is only slightly better for bulls. While the May contract held support at $5.00, it notched a lower low and a lower high on the daily chart. “The new low today at $4.995 basis May futures still fits within the context of a possible rounded bottom, with the limited followthrough demonstrating yet again that there is little vulnerability still left in the market,” wrote Tim Evans in a note to customers Monday.

“The spot low set last week by the expiring April contract at $4.98 allows a touch more room for the market to bend without breaking. A heavier drop could target either the $4.69 spot low from late December or failed resistance at $4.44 as a possible target, although we think the bears will be leery of selling short in much size,” Evans added.

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