Putting together the second consecutive regular session of gains, natural gas futures traders on Tuesday once again discarded a mound of bearish fundamentals in exchange for changing weather forecasts, which are now calling for February to be not as warm as first expected. March natural gas futures recorded a high of $8.005 before closing out the day at $7.942, up 7.3 cents from Monday’s finish.

With comfortable storage levels, the lack of supply disruptions, a weak economy and the winter season ticking off day by day, most traders expected gas futures to be selling off here. However, if the temperature outlook for February in key gas demand regions turns more blue than red, then sizeable storage withdrawals could be on the horizon, putting pressure on the commodity’s price.

“The talk among traders is that revisions in some of the weather forecasts to a colder February are behind this recent bout of strength in natural gas futures,” said a Washington, DC-based broker. “It is now expected to be fairly chilly in the Chicago/Midwest area and the Northeast, which are heavy natural gas demand regions. I guess the weather is lifting this thing, but I’m having trouble believing this is going on in the face of such a weak economy. The fact that gas could rally under these circumstance is just incredible. Our models are still all bearish, so I guess we are going to have to say: ‘Show me the weather.'”

The broker noted that even as the market continues to rally, traders are hesitant to take their eyes off the screen for fear that they might miss the break. “We will see how this all shakes out, but I think there are a lot of people skeptical of this recent rally. Now is not the time to be out of reach of the ‘sell button,'” she said.

Signs of the big chill were becoming evident in the National Weather Service’s (NWS) Tuesday forecasts for February. The six- to 10-day forecast covering Feb. 11-15 calls for above-normal temperatures for a vast majority of the Lower 48 with the exceptions of the Northeast (a mix of normal to below-normal conditions), Michigan Wisconsin and Minnesota (normal) and the Northwest (mix of normal to below-normal temperatures). Just a day earlier, the NWS forecast for a similar period saw the entire eastern two-thirds of the country basking in above-normal to much above-normal conditions.

Similarly, the NWS eight- to 14-day outlook on Monday called for the entire eastern two-thirds of the Lower 48 to see above-normal temperatures. However, on Tuesday the northern regions across the country are now expected to experience normal to below-normal Feb. 13-19 temperatures.

Monday’s gain in March futures of 12.9 cents to $7.869 had some traders wondering where the impetus for higher prices came from. While there were some indications of bullish weather forecast, traders were quick to point out the lessening impact of cold weather as the market enters the downhill portion of the heating season.

In its six- to 10-day forecast MDA EarthSat calls for cooler temperatures in the East at the beginning of the forecast period. “Today’s update features extremes on both ends of the spectrum with intense cold in the first half of the period, only to be overtaken by strong warming by days nine and 10,” said Matt Rogers, MDA EarthSat meteorologist in MDA’s morning forecast. He added that some of the changes were quite large, particularly across the Midwest, East Coast and Southeast as “the colder trends seen in yesterday afternoon’s [computer] runs continued into the overnight models. In the end, the result is a cooler look to the eastern U.S.”

Cooler look or not, traders see only a nominal impact. “We have yet to see definitive evidence of a sustained broad-based zone of below-normal temps in which deviations vary considerably from normal,” said Jim Ritterbusch of Ritterbusch and Associates. He doesn’t think the market will sustain prices above $8. “Even allowing for some colder expectations, we would note that cold temperature forecasts have a much smaller price impact during February than they do during their early winter period,” he said in a note to clients.

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