With the natural gas futures market’s recent failures to get above $8.620, some traders, citing not enough cold or winter left to drain storage to price-pressuring levels, are forecasting lower prices. The March contract on Wednesday settled at $8.388, down 4.8 cents from Tuesday.

Adding to the bearishness was the fact that in addition to the lower close Wednesday, the prompt-month contract also recorded a lower high ($8.530) and a lower low ($8.360) than Tuesday’s regular session.

“The market tested and failed at that $8.620 area on Monday and Tuesday and I think the funds are selling into it,” said Steve Blair, a broker with Rafferty Technical Research in New York. “I think we got our first indication in last Friday’s CFTC [Commodity Futures Trading Commission] Commitments of Traders report. The report showed that the funds have gotten a little shorter, so every time we get up to the higher end of the range, it gets sold off. On Wednesday we struggled to get up to $8.530, but the selling was quick to come in.”

Blair noted that the market is currently surrounded by some interesting information. “Temperatures in February have not been as mild as once expected. Add to that the fact that we are now only 62 Bcf above the five-year average storage level and people are now realizing that this year’s storage situation is not going to be exactly like last year’s situation,” Blair said. “If we get another week or two of 200 Bcf withdrawals over the rest of this month, then there would be real reason for concern, but I don’t think we are going to see that.”

According to storage report expectations for the week ended Feb. 8, Blair’s hunch won’t be proved incorrect at least this week. Taking a break from the 200 Bcf or greater withdrawals of the last two reports, the energy industry appears to be looking for a pull of just over 100 Bcf when the Energy Information Administration (EIA) report is released Thursday morning at 10:30 a.m. EST.

A Reuters survey of 23 industry players included a range of withdrawal expectations from 91 Bcf to 135 Bcf, but the center-point was for a 113 Bcf draw. Golden, CO-based Bentek Energy said its flow model produced a 112 Bcf pull expectation, which would bring stocks to 15% below the five-year high and 6.4% above the five-year average. Bentek expects the East region to see a 65 Bcf withdrawal, while the West and Producing regions will remove 29 Bcf and 18 Bcf, respectively. According to the research and analysis firm, storage fill nationwide decreased 6.2% from 55% to 51.2% for the week.

Last year a whopping 259 Bcf was withdrawn for the similar week. On a date-adjusted basis to match up with the exact same seven days of 2008, the EIA reported that 254 Bcf was removed from underground stores during the 2007 week. The five-year average draw for the week is 167 Bcf.

Looking at the recent trading action of this week, some traders are of the belief that a price top is already in and that lower prices lie ahead. Price moves recently have been predicated on short-term weather forecasts, but a noted forecaster points out the difficulties with recent predictions. In his Wednesday morning blog, AccuWeather.com forecaster Joe Bastardi pointed to the recent storms pummeling the East as an example of how wrong forecasters can sometimes be.

“I hope the reader has taken special note to the storm we are seeing now. The [weather] model completely underdoing the cold coming in. [There were] two-day temp busts in NYC, which I use as the example, but one can use them all over, [and] are on the order of six-10 degrees with the cold as it came in, and as it left. Forecasts for Tuesday in NYC from Sunday were for increasing clouds, highs in the upper 30s, and were jokes given what happened. And it was like that all over the place,” he wrote.

The actual high in New York City Tuesday was 31 and followed a 24-degree high on Monday. “There has been no winter really to speak of the last six or seven weeks in areas that are having it now in the Mid- and North Atlantic states. So this sticks out like a sore thumb,” he said.

Traders are keenly aware of recent weather volatility. “The market is now focused on growing suggestions of a warm-up beyond next week capable of again slowing storage withdrawals,” said Jim Ritterbusch of Ritterbusch and Associates. He added that the “acceleration/deceleration” in weekly storage figures this winter has reflected unusual volatility in the weather patterns, a trend that appears likely to continue through the rest of the winter.

Ritterbusch is not bullish. “We now feel that [Tuesday’s] drop back to below $8.400 suggests that a top has been placed. With the shoulder period approaching, sustaining price rallies in this market will prove arduous without some bullish spillover from the oil complex,” he said in a note to clients.

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