Sparked by eastern cold and the expectation of significant natural gas storage draws in the near future, March natural gas futures on Thursday rebounded to claim a 10.4-cent gain and closed the regular session at $5.396.

“With the winter storm of the last two days basically decimating the Mid-Atlantic and Northeast, I think traders are returning at least some of their attention to the storage situation,” said Julio Sera, a broker with Hencorp Futures LC in Miami. “Friday’s storage report for the week ending Feb. 5 will likely show a pretty big withdrawal, with the report for this week expected to be even larger. If you’re getting snow storms that are so bad it is delaying the release of these reports because people can’t get to work, I would think that alone could add some support to prices.”

Sera noted that he expects futures to test the upside in the near term. “I think there is some price control above us here that we’re going to need to test from a technical perspective,” he told NGI. “There are breakout targets above us. One of them is $5.647. Before we get there, we’ve got price control on the charts up at $5.487 to $5.500. With all of this range-trading and sideways movement, if you would have sold some strangles — like a $6 call or a $5 put, I think you’d be doing very well right now.”

No matter what happens over the next week or so, Sera said the market could fall pretty hard by the end of the season. “You might see this market come down pretty sharply to [production] cost by the end of winter. If that happens there could be a $3 handle by the end of the withdrawal period. We still have a lot of gas.”

The National Weather Service’s eight- to 14-day outlook calls for below-normal temperatures for all of the U.S. east of the Continental Divide. Analysts suggest that should lead to hefty storage drawdowns for the rest of the month.

“At this stage, temperature forecasts continue to come out on the colder side, with the National Weather Service having predicted a steady stream of colder-than-normal readings from the start of the month all the way to February [24th],” said Peter Beutel, president of Cameron Hanover. He noted that the forecasts call for “colder-than-normal readings east of the Mississippi and extend west into the northern Plains and as far southwest as Texas. In effect, that covers almost everything east of the Rockies. This suggests that we should have decent to potentially larger-than-historical drawdowns in reports released all the way through the end of this month.”

Short-term traders aren’t so sure that will translate into lower prices. “I think the market is still on a decline and I think $4.90 to $5.00 is not out of the question,” said a New York floor trader. “I don’t think it’s going to take off any time soon, and I still think we have room to the downside over the next couple of days.” He added that $4.90 “maybe down to $4.80 should be a short-term bottom.” He also suggested that there may be stop-loss orders at $5.20 that could take the market down to those levels.

Others see the market without any discernible trend and are keeping their powder dry. “My model is currently flat the market, and is not showing any trend,” said an Oklahoma City broker. He did admit that it was more likely that a sell would be triggered than a buy and said if the market settled another 10 cents lower than Wednesday’s close, it would go into a sell mode.

Turning attention to this week’s delayed storage report for the week ending Feb. 5, it appears most industry insiders are expecting a draw in the 180s Bcf. A Reuters survey of 26 industry players produced withdrawal expectations between 160 Bcf to 2002 Bcf with an average expectation of 180 Bcf. Bentek Energy projects a withdrawal of 182 Bcf, which would bring inventory levels to 2,224 Bcf. The research firm expects a 112 Bcf draw in the East Region, a 54 Bcf draw in the Producing Region and a 16 Bcf draw in the West Region.

Citi Futures Perspective analyst Tim Evans expects a 165 Bcf draw in the 10:30 a.m. EST report on Friday, which was delayed one day due to the federal government shutdown in response to inclement weather.

The number revealed Friday morning will be compared to last year’s date-adjusted 164 Bcf pull and the five-year average pull of 156 Bcf.

©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.