Despite the arrival of some of the coldest air in several years across much of the eastern half of the country, natural gas futures prices fell Tuesday as traders learned that moderating temperatures are forecast in some medium-range weather outlooks.

However, the price action in the gas pit was anything but one-sided as bargain buying entered the fray each time the market dipped toward the $5.35 mark. February finished at $5.433, down 10.3 cents for the session. Volume was heavy as an estimated 97,182 contracts changed hands.

Whether made clear from the warnings to protect outdoor pets and sensitive plants in the Southeast or alerts to New Englanders about the threat of frostbite on any skin left exposed, there was little doubt Tuesday that the eastern United States was in the clutches of an arctic air mass. But that didn’t seem to faze futures traders who liquidated their long holdings in accordance with changes in the medium-term weather outlook.

According to the latest six- to 10-day forecast released Tuesday by the National Weather Service, above-normal temperatures will extend from the West Coast all the way across the country to the Appalachian mountains for the Jan. 27-31 time frame. Meanwhile, normal temperatures are expected to return to New England and the Mid-Atlantic states. Below-normal temperatures, which are currently seen over the entire East, will be confined to the Southeastern states.

Traders polled by NGI Tuesday agreed that had it not been for the potential for a very bullish storage report set to be released Thursday, the futures market would have tumbled much lower on the predicted warming trend. Expectations ahead of that report call for a withdrawal of 200 Bcf or more. If realized, a number of that magnitude would easily surpass the year-ago comparison of 126 Bcf as well as the five-year average of 152 Bcf.

Going forward, the year-on-year comparisons will continue to be bullish, says Thomas Driscoll of New York-based Lehman Brothers. Citing NOAA forecasted degree days heating for this week of 217 versus 178 last year, 222 normally and the five-year average of 199, Driscoll calls for a 185 Bcf net takeaway in the announcement of this week’s withdrawals. If his estimates for the next two storage reports are correct (200 Bcf and 185 Bcf), the oft-quoted year-on-year deficit would rise to 600 Bcf. Since expanding to 575 Bcf just before Christmas, this deficit has shrunk in three consecutive weeks to a level of 453 Bcf as of Jan. 10.

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