Natural gas futures bears were licking their chops as some near-term weather forecasts continued to look warmer with each passing day. On Tuesday the February contract — which terminates on Wednesday — declined by 23.7 cents to close at $5.485. The March contract fell by 23.3 cents to close at $5.430.

Forecasters made an abrupt change in their near-term outlook. MDA EarthSat’s Monday forecast called for below-normal temperatures across a broad swath of the Northeast, Midwest and Southeast, but that has changed considerably. In both its six- to 10-day and 11- to 15-day forecasts it is now calling for warmer conditions.

“This [six- to 10-day] period is warmer overall today from a combination of forecast progression and some warmer day-on-day changes. The biggest changes were across the Midwest and Northeast, which have warmed to just normal instead of below, losing the coldest day to day five,” the forecaster said. It went on to say that a quick warm-up was still expected to move through the Midwest and Northeast around mid-period, though the cold shot to follow looked weaker in model runs Tuesday. “Our forecast is a compromise between the warmer Euro models and colder American models late in the Midwest, with a slight favoring towards the Euro versions.”

However, some market watchers were scratching their heads a bit as the near-term forecasts they were watching were calling for colder temps than first thought. “The National Weather Service’s near-term outlooks are colder than they were on Monday,” said a Washington, DC-based broker. “Right now it is cold and blizzardy in the Midwest and that system is supposed to be coming through the East. Both the six- to 10-day and eight- to 14-day forecasts are showing a return to below-average temperatures, so I have no idea why people are selling off natural gas futures. It does not make a whole lot of sense.”

The broker added that Tuesday’s drop could have been tied to traders getting their books straight ahead of the February contract’s expiration. “The February-March spread widened just a bit on the day, so traders could have been selling February and buying March,” he said. “While a 23.7-cent drop might seem significant at face value, we’re still comfortably within our recent range of $5.350 to $6.100. As long as we hold $5.350, this action might just be chopping down to the bottom of the range before testing the upside once again. If we get another blast of cold, we’ll run right back up to $6 again pretty quickly.”

Some traders see the move of the March contract to the pole position following Wednesday’s expiration of February futures as pivotal. “The upcoming debut of the March futures as spot month will force the front of the curve to rely more heavily on non-weather-related guidance with the approach of the shoulder season,” said Jim Ritterbusch of Ritterbusch and Associates. Ritterbusch sees weather as being less of a price driver and said, “We still have much difficulty in building a strong case for a move of more than 10% in either direction from [Monday’s] settlement [February $5.722].”

Funds and managed accounts seem to be buying into the bullish case. The Commodity Futures Trading Commission reported increased open interest on the long side of the market for the week ended Jan. 19. The managed money component, including futures and options on the New York Mercantile Exchange, increased long holdings by 316 contracts to 143,216 and short positions by 4,271 to 181,184. On IntercontinentalExchange long positions (2,500 MMBtu) increased 42,508 to 501,666 and short positions rose by 3,523 to 24,463. After adjusting for contract size long positions (futures and options) on both exchanges increased 10,943 and short holdings rose 5,152. For the five trading days ended Jan. 19, February futures fell 3.4 cents to $5.557.

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