Finishing its wild ride as prompt month, February natural gas on Friday opened at $8.550 — significantly higher than Thursday’s close — and put in an $8.640 tick in the first minute of the session. However, that ended up being the high for the day as the prompt month bounced in the low-to-mid-$8 area for the rest of the session before expiring at $8.400, up 17.1 cents on the day but 88 cents lower than the previous week’s close.

Of more interest was the meteoric fall of the February contract over the past month and a half. Since the warm weather trend hit in mid-to-late December, February natural gas has plummeted from a high of $15.780 on Dec. 13, 2005 to an intraday low of $7.750 on Jan. 26, marking a $8.030 swing.

“Closes aren’t what they used to be,” said a Washington, DC-based broker. “The real interesting thing on Friday’s session came late in the day. From 2:12 to 2:28 p.m. EST, February natural gas traded virtually within a five-tick range. The screen kept going from $8.40 to $8.45 and back, with very few outliers. It was really bizarre with low volume.

“It was busy in the fact that it was bidweek and I had people triggering out the curve, but the close itself, I think, was thinner than we have seen in the past,” she said. “However, it did look like somebody was short and waited till the very end to cover.” The closing range in the last minutes spanned 45 cents from $8.45 to $8.00.

“The weather we’ve had has been pretty crazy,” the broker added. “Looking at the National Weather Service’s six-to-10-day and eight-to-14-day forecasts, it still doesn’t look very good for bulls or demand. The eight-to-14-day forecast looks like some normal seasonal temperatures will likely come into demand areas, but nothing overtly cold.”

The broker noted that it looks like the March contract will pick up the downward trend where February left off, which “is bad for those who own it and great for those that don’t,” she said. As for support areas for March, she said February’s $7.75 low from Thursday’s session is instantly the next target for March, which closed 8.6 cents higher Friday at $8.507.

The NWS’ six-to-10-day forecast, which covers Feb. 2-6, has more than two-thirds of the country seeing above normal temperatures for this time of year. Over this period, the far Southeast is expected to be colder than normal with a section from the top of Virginia running diagonally into East Texas having an equal chance of warmer or colder than normal conditions. The eight-to-14-day forecast (Feb. 4-10) gets a little chillier with cold pushing further north from the Southeast and more pockets of seasonal cold in Texas and the Northeast.

Thursday’s reported natural gas storage withdrawal of 81 Bcf was just above market expectations, which had been looking for a figure in the low to mid-70s, yet traders realized that the apparent bullishness was deceptive. “On a temperature-adjusted basis, the supply/demand balance is considered bearish by about 2 Bcf/d,” said Kyle Cooper of Citigroup. He noted that current market bearishness was due to mild weather, but “the (supply-demand) balance is certainly not bullish. End of March inventories may exceed 1,500 Bcf and inventories in October are projected to be at record highs.” He added that if inventories from here on out were drawn down 110% of the five-year average through March 31 and injections only tallied 90% of the five-year average, next year’s beginning inventory would be over 3,300 Bcf.

With residential thermostats lower than normal, the warmer winter has led to near-record natural gas storage levels for this time of year. As of the week ended Jan. 20, an astounding 2,494 Bcf of natural gas remained in working gas storage, according to the Energy Information Administration (EIA). The five-year average for this time of year is 2,049 Bcf.

Over the last 12 years, 2002 was the only year with more gas in storage following the third week of January. The report for the week ended Jan. 18, 2002 revealed a working gas storage level of 2,522 Bcf, but this estimate was derived from a computation process that used both EIA monthly survey data and American Gas Association weekly survey data. Spot month natural gas futures prices closed the very same week in 2002 at $2.236.

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