The natural gas futures market on Tuesday continued its recent bout of range-trading as the March contract dropped 15.8 cents from Friday’s finish to close at $5.310.

It appears that the market is continuing to wrestle with conflicting fundamentals, a New York broker observed, adding that the current stretch of renewed cold is doing battle with storage inventories that are still on the comfortable side.

Other market watchers expanded on the current situation in futures prices. Heading into Tuesday’s regular trading session, Citi Futures Perspective analyst Tim Evans noted that the market still appears to be directionally challenged, despite updated temperature forecasts that “seem quite constructive,” with temperatures projected to run eight to 12 degrees below normal in both the six- to 10-day and 11- to 15-day forecast periods.

“We see a conflict here between these supportive forecasts and what has been lackluster price action over the past week or more, which seems to have bearish implications for the longer term if the cold fails to produce a price spike, leaving the market vulnerable to any warming trend that follows, with the storage withdrawal season drawing toward its usual end-of-March finish,” Evans added.

According to forecasters, a strong blocking pattern has settled in and deep cold is forecast in major energy markets over the next 10 days. MDA EarthSat said changes in its six- to 10-day forecast since Monday have been in a cooler direction. “Strong belows [normal temperatures] were added to central Canada as high pressure with polar origins settles in. This cold air mass is expected to creep southward during the second half of the period, bringing much belows and even strong belows into the central U.S. This will certainly increase demand, but rising normals in late February will keep the cold less intense than in December or January. With the strong blocking still in place at the upper latitudes, confidence in the cold is high overall but lower on exact details.”

According to figures submitted to the Commodity Futures Trading Commission, natural gas directional traders shifted their focus to the long side of the market by increasing long positions and decreasing short holdings. For the week ended Feb. 9 managed money traders at IntercontinentalExchange held long natural gas futures and options contracts (2,500 MMBtu) totaling 546,052, an increase of 2,618, and short positions rose by 5,413 to 25,344. On Nymex long futures and options (10,000 MMBtu) rose 3,786 contracts to 138,191 and shorts fell by 6,418 to 159,631. After adjusting for contact size long holdings of futures and options on both exchanges rose 4,440 contracts and shorts declined by 5,065. For the five trading sessions ended Feb. 9, March futures fell 16.4 cents to $5.290.

Analysts, however, don’t see changes in the composition of the open interest as capable of sustaining price advances. “We look for any fundamental surprises such as last Friday’s larger-than-expected storage withdrawal to prompt an exaggerated price response as funds reduce short holdings,” said Jim Ritterbusch of Ritterbusch and Associates. According to Ritterbusch, the gas market is “theoretically immune to international issues such as the European debt problems; the market is forced to focus largely on weather guidance, weekly storage data and various economic releases that could provide clues to future industrial demand.”

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