“Better late than never” might have been the mantra of natural gas futures bears on Wednesday as the February contract finally corrected Monday’s 24.5-cent rally. Riding updated forecasts that show temperatures might not be as cold as previously expected in the coming weeks, the prompt-month contract recorded a $4.447 low on Wednesday before closing the regular session at $4.473, down 19.6 cents from Tuesday’s finish.

Despite the revisions to both the National Weather Service’s six- to 10-day and eight- to 14-day outlooks that eliminated much of the deepest blue — most-below-normal temperatures — from the picture, both forecasts still called for much of the country to see colder temperatures than the norm.

Explaining Wednesday’s plunge, Citi Futures Perspective analyst Tim Evans said traders appear to be responding to the day-to-day shift in the temperature outlooks instead of focusing on the big picture, which is that January is still largely expected to be colder than normal.

While traders “see a warming trend in the forecasts themselves…we would remain focused on the outlook itself, which still shows temperatures to average well below normal across most of the continental U.S. over the next two weeks, with above-average storage withdrawals to match,” Evans said. “The weather map is not a bear market picture, and we continue to see potential for the market to climb to the $5 level or possibly somewhat higher, depending on just how soon the wave of cold dissipates.”

Turning attention to Thursday’s natural gas storage report from the Energy Information Administration for the week ending Dec. 31, most industry withdrawal expectations fall between the low 130s Bcf and the mid 140s Bcf.

Evans is on the record for a 145 Bcf draw, while a Reuters survey of 25 industry players produced a 114-148 Bcf withdrawal range with an average draw expectation of 133 Bcf.

A storage draw anywhere within the Reuters range would be smaller than last year’s date-adjusted 153 Bcf draw for the week, but much larger than the five-year average draw of 80 Bcf.

Computer runs now show the longer-term weather outlook becoming slightly less aggressive. Commodity Weather Group of Bethesda, MD, in its 11- to 15-day outlook still shows below- to much-below-normal temperatures south and west of New Hampshire all the way to a line from southern Oregon to South Texas, but this is a somewhat more tempered outlook compared to Tuesday’s forecast.

“While the short-range [forecast] progresses colder and the six-10 day still shows widespread much and strong below-normal temperatures, bigger questions are lurking [Wednesday] morning regarding the 11-15 day,” cautioned Matt Rogers, president of the firm. “The American operational models are still gung-ho on super-massive strong below-normal conditions, but the American ensembles have pulled back a bit and the European ensembles have pulled back a lot. The debate seems to be around the second shot of cold air and whether it will make it down the pipeline before the blocking mechanism that drives it south starts to leave Alaska. The biggest change was to warm the South.”

Top analysts surveying the technical landscape at first glance see a positive outlook but caution against any new purchases. “From a technical perspective, the market’s ability to post four-month highs this week would appear to favor a resumption of the recent price advance with nearby futures possibly carrying toward the $4.80 area,” said Jim Ritterbusch of Ritterbusch and Associates. “This would also suggest price support through the balance of this week at about the $4.50 level just above the chart gap created by this week’s strong opening. All in all, while we feel that the market is capable of making a run at new highs, we also view risk/reward ratios as unfavorable to fresh entry into the long side.”

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