After checking both above and below last Friday’s trading range, the natural gas futures market snapped back to unchanged late in the session Monday as neither bull nor bear could muster enough support for their price moves. The March contract finished at $5.349, down 0.5 cents for the session and in the bottom half of its 24-cent daily trading range. By comparison, the out months continued to buck the trend with several summer 2004 months posting 5- and 6-cent gains for the day.

There were two sides to every argument traders could make Monday. While much of the East Coast is set to see normal and even above-normal temperatures this week, the forecast calls for another cool down next weekend, with mercury readings expected to drop back to sub-seasonal levels. Further out on the horizon, the National Weather Service in its latest eight- to 14-day outlook calls for below normal temperatures for the entire eastern half of the country.

The weather was not the only factor open to interpretation Monday. Also providing fodder for both bull and bear was the storage situation. While most agree that the current level of gas in the ground, at 1,827 Bcf, is ample, there is a growing concern that supply this summer will be inadequate to bring inventories back up to the 3 Tcf level in time for next winter’s drawdowns.

Also fueling the bullish sentiment is the greater-than-average heating degree day accumulation for last week. “Last week was about 15% colder than normal. As a result, we expect a strong storage withdrawal of 205 Bcf for the week ending [Feb. 6],” wrote Lehman Brothers analyst Thomas Driscoll in a note to customers Monday.

However, analyst Stephen Smith noted that while the weather last week was cooler than average, it was warmer than the week prior. “There was a sequential decrease of 28 HDDs (or 11%), which is the dominant reason for the weaker projected 181 Bcf draw this week as compared with the 236 Bcf draw for [the week ending] Jan 30.”

Tim Evans of IFR Pegasus in New York is predicting a 170-180 Bcf withdrawal, which is on the low side of expectations. “This would compare favorably to both the 150 Bcf draw from last year and the 127 Bcf five-year average mark,” he added.

In daily technicals, Jay Levine of New Hampshire-based Advest Inc. sees support for March in the mid- to low-$5.30s. Lower still, the market “appears to want to make new lows back in the $5.20s,” the broker speculated. “The bottom line is these energy markets remain in a malaise more than they are in a bear market in my opinion. The risk may be two-sided, but my bias remains up.”

On the upside resistance is seen first at $5.60 and then again at last week’s double top at $5.79, said technician Cynthia Kase.

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