Boosted by another bullish weather forecast from Salomon Smith Barney meteorologists, natural gas futures spiked to new two-year highs Wednesday as fund and local buying converged at Nymex. The March contract received the biggest buying boost as it topped out at $6.20 before being deposited lower by light afternoon profit taking. It settled at $6.134, up 22.3 cents for the day.

Traders were almost unanimously in agreement that private weather forecasts for next week that call for a return to below normal temperatures were responsible for the price rally Wednesday.

After receiving many calls from people concerned that the National Weather Service forecast was in such stark contrast with Salomon Smith Barney’s outlook, Jon Davis of SSB felt it necessary to clarify his position in a special note to his clients Wednesday morning. “Yesterday afternoon, we got numerous questions about the 6-10 day forecast that was issued from the government. It was predicting warmer than normal temps over the entire Mid-Continent/Great Lakes with no below normal anomalies in any portion of the central or eastern United States. The bottom line is that we adamantly disagree with the government forecast and feel that temps next week over a large portion of the eastern half of the nation will be significantly below normal.

“[Wednesday] morning’s guidance is the same as [Tuesday’s] — it looks cold next week in the eastern United States. As to why this government [six- to 10-day] forecast from Monday afternoon was so warm, we have no clue since it was not on any map we looked at during the past three days.”

Also a factor in the price advance Wednesday was strength in the nearby crude and heating oil markets. Technical buying ahead of the confluence of DOE petroleum inventory numbers and the expiration of the March crude contract were popular reasons for the price spike. Heating oil led the advance in the petroleum complex with bullish fundamentals giving buyers the green light for a 3.4-cent advance and $1.099 close Wednesday.

Looking ahead, however, sympathy with distillates and talk about the weather will be set aside for at least a while Thursday when fresh storage data is released. Expectations are centered on a 189-205 Bcf withdrawal, which would compare bullishly against last week’s 150 Bcf withdrawal, a year-ago takeaway of 124 Bcf and the five-year average withdrawal of 91 Bcf.

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