Confounded by seemingly contradictory weather forecasts, natural gas futures traders chose to side with what they knew Monday as they pressured the market lower in sympathy with bearish supply news issued last week. February futures finished at $5.727, down 33.2 cents for the day.

According to the latest six- to 10-day forecast released Monday afternoon from the National Weather Service, below normal temperatures are expected across a large area of the eastern United States for the first five days of February. Specifically, the NWS targets a swath of cold air from the Rocky Mountains all the way east to the Atlantic Ocean. The only areas of the country expected to see normal readings over that period are eastern New York State and New England, as well as the western quarter of the country. Warmer-than-normal weather is forecast for the state of Maine, which will be cold regardless.

Under normal circumstances, a weather outlook like this would be like a red flag in front of an angry bull. However, the East Coast is currently stuck in cold weather rut not equalled in nearly a decade, leaving the latest round of forecasts open to bearish interpretation. Also in bears’ favor Monday, were computer-generated forecasts released over the weekend by the NWS as well as some private outlooks calling for a warming trend. Needless to say, there existed enough doubt in traders’ minds Monday to continue the selling pressure.

Also in bears’ favor Monday was the knowledge that despite another week of forecasted chilly temperatures, supply is ample. Last week the Energy Information Administration shocked the market by releasing a report showing that storage inventories decreased by only 156 Bcf during the week ending Jan. 16. A report like that serves as a double whammy in favor of the bears. Not only is it price negative on its own, it serves to quell fears over the risk of a large storage withdrawal in subsequent weeks of the heating season.

Early expectations for this Thursday’s data release suggest storage may have decreased by 170-190 Bcf during the week ending Jan. 23, says Tim Evans of IFR Pegasus in New York. “While this will fall short of the record 247 Bcf drop from a year ago and could attract even more selling, we note it would run marginally over the 165 Bcf five-year average.”

In daily technicals, Evans is bullish, but would not recommend buying this market at current levels. Instead, he is waiting on the sidelines for the chart to repair itself. “While we are skeptical of the market’s ability to sustain a downtrend from current level, we would also argue against buying weakness, at least until we see some prices action that looks more like base building.”

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