Following the release of some of the most price-constructive medium range weather forecasts thus far this winter, natural gas futures shuffled higher Thursday. Continued short-covering pressure was enough to promote prices to new six-week highs for the third day in a row. However, the buying was done in an orderly manner, and because it was almost evenly matched by local and commercial selling, the day’s gains were limited. The March contract settled at $2.425, up 4 cents for the session. By virtue of yesterday’s 118,144 figure, estimated volume has easily eclipsed the 100,000 mark each day this week.

According to the latest six- to 10-day forecast released yesterday by the National Weather Service, March will come in like a Lion as temperatures from eastern Oregon down to West Texas, extending east all the way to the Atlantic Ocean, are expected to be below normal for the Feb. 29 through Mar. 3 period. Above-normal temperatures will be confined to the California and southern Arizona which could actually be construed as bullish because it will likely translate into early season air-conditioning load for those markets.

While the market has known about the chance for weather-related demand for most of this week, it was not fully aware of the protracted area (roughly 80% of the contiguous 48 states) now forecasted to see unseasonably cold temperatures. Further out on the horizon in its eight- to 14-day outlook, the NWS calls for more of the same with the populated areas of the Midwest, Northeast and Southeast solidly in the blue on its forecast maps.

However, several sources polled by NGI yesterday were quick to discount these weather forecasts as a case of “too little, too late” to impact the overall fundamental situation. “Sure it will seem cold compared to the 60 degree weather we have seen this week,” a New York-based trader said. “If these forecasts had come during the first week in January we would be up a half-dollar. But now with winter almost over and storage at record levels, it is almost a non-factor,” he said.

“We really can’t expect the market to drop in the face of the colder weather,” said Tim Evans of IFR Pegasus in New York. “But four or five days of cold do not a winter make, and its arrival as the calendar turns from February to March is really too late to have much impact on short-term prices.” That being said, Evans has a sell stop waiting at $2.34 to capture a 10-cent profit on his March long position from $2.24. A second sell stop also placed at $2.34 would open a short position, he said.

Further selling is likely at the 40-day moving average for March, which yesterday came in at $2.278. On the upside, resistance exists at the $2.50-535 gap left by the lower open on Jan. 2.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.