After managing minor gains Tuesday and Wednesday, February gasfutures were unable to hold ground and slipped into the holidayweekend at $2.329, down 6.5 cents for the day and nearly back wherethey started the week. Both fundamental and technical indicatorsshowed continued downward momentum on Thursday.

“It looks pretty weak,” said Ira Hochman, of New York City-basedTrot Trading Corp. “I haven’t seen any buying in the market. Youjust have to be short and sell rallies until you see some buying.Let’s see what they do with the $2.29 area — the lows from[Monday]. Once they take out the low, I think they will probablytest it and make a double bottom down there about $2.23. At thatpoint either we are going to stall out and start consolidating orwe’re are just going to keep on going. And right now there’snothing stopping it. There’s no stepping in front of this thingyet.”

Hochman said he expects some support at $2.22. If that doesn’thold, he looks for $2.05. “The more we develop below [$2.33] theworse this is going to look; they just have to keep selling,” headded. “If it develops below $2.22 — and I mean develops, notjust trades below $2.22 — then you’ve got to just slam it; then Ithink this thing is going to go. I guess the first [support level]will be like $2.05.”

Hochman also noted there are very few bullish fundamentalsavailable right now aside from a little short-term cold in theMidwest. The January weather outlook is generally bearish, accordingto the National Weather Service and Accuweather. The National WeatherService’s recent six- to 10-day outlook released on Wednesday callsfor a large bubble of below normal temperatures stretching south fromCanada over the Midwest, the Northern Plains, northern Rockies and thePacific Northwest. Further south and east, it’s an entirely differentpicture, with above normal temperatures for the entire East Coast,including the Northeast, Mid-Atlantic and Southeast regions, as wellas the Gulf Coast and most of Texas. Judging from some longer-termforecasts by NWS and Accuweather, January looks like it will end upwith warmer than normal temperatures on average.

The storage picture has taken on a more bullish hue lately,however, with a major withdrawal reported by the American GasAssociation last week for the week ending Dec. 24. AGA reportedworking gas levels dropped 173 Bcf, which was much greater than the125 Bcf average withdrawal for the same week over the past fiveyears and slightly more than the 167 Bcf withdrawal reported forthe same week last year. The large drawdown leaves storage levelsat 2,570 Bcf, or 79% full. Working gas levels are 233 Bcf lowerthan at the same time last year but are still 224 Bcf above thefive-year average.

Susannah Hardesty of Greencastle, IN-based Energy Research &Trading, said the large withdrawal shows a decline in wellheaddeliverability because temperatures that week were only 3% belownormal and were 6% warmer than the same week last year.

“I was really impressed with that AGA number,” said Hardesty.”There’s only been one AGA withdrawal during the month of Decemberthat was higher and that was in 1995. To have that huge withdrawalwithout that much cold makes you wonder what’s going to happen whenyou get into the depths of January.

“Today was a down day,” she noted Thursday “but it didn’t gobelow my support level [at $2.30].” Hardesty said the currentweather outlooks are a “mixed bag,” with NWS and Accuweathershowing a warmer than normal outlook than the forecasts ofSalomon Smith Barney’s Jon Davis and Strategic Weather Services.But she is placing her bets on a sharp price rebound this weekbased on colder Midwest temperatures and declining deliverability.

“I’m looking for a rebound on Tuesday,” she said regardingFebruary prices. She has a very ambitious upside target of $2.70,which she said could be reached this week. “When you look athistory in terms of the final highs that have been hit,” Jan. 9 isthe key ending date.

She also noted, however, that predicting market direction basedon the last few trading days of the year can get you in trouble.Few players were in the market last week. The price movement couldbe misleading, she said. Volume on Thursday was estimated at ameasly 30,739 contracts.

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