Feeding off late session gains notched Wednesday, natural gas futures plodder higher Thursday as traders continued to look past bearish fundamental factors to focus on the winter weather forecasts and modestly constructive technical indicators. However, an extremely light estimated volume of just 61,048 limited the market’s upside potential, and as a result, the January contract experienced an “inside-day” on the daily charts with a lower high and a higher low. The prompt month settled at $2.756, up 3.7 cents on the day.

Most traders polled by NGI Thursday remained in disbelief of the market’s ability to resist tumbling lower amid undeniably price-negative fundamental factors. The American Gas Association only fueled that fire Wednesday when it announced that a trifling 22 Bcf was withdrawn from underground storage facilities last week. Storage now stands at 3,106 Bcf, which is 2 Bcf above where it was at this same time in 1998 when prompt month prices were almost exactly a dollar lower (prompt prices continued lower in the first quarter of 1999 to notch a $1.625 low during the last week of February).

Looking ahead, traders continue to bet on the arrival of below-normal temperatures to justify the current price level. Ever since long-lead forecasts released back in October by both private and governmental forecasting agencies called for a cold winter (see Daily GPI, Oct. 17), traders have been looking for it at every turn. In fact, market watchers have done a commendable job of filtering out the bearish overall nature of the weekly weather updates to hone in on a specific detail of the weather report that they can construe as bullish. However, the statistical information does not lie. Thus far this winter it has been 31% warmer than last year and 21% warmer than the 10-year average according to Reliant Energy’s Weather Sensitive Gas Load Indices (see page 4 of this issue).

However, by virtue of yesterday’s release of fresh 30- and 90-day outlooks by the National Weather Service, market watchers will once again have the ability to draw their own conclusions about the potential for gas demand at some later date. According to the NWS, below normal temperatures are expected through March for the entire northeastern United States, extending west to include the Upper Midwest and Great Lakes Regions. At the same time, the NWS predicts above-normal temperatures for the West Coast and the Southern half of the country over the same period.

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