After running higher prior to Monday’s regular trading session, the March natural gas futures contract peaked at $5.679 just a few minutes after the open before declining for the rest of the day. The prompt-month contract finished out the regular session at $5.401, down 11.4 cents from Friday’s close.

The futures slide came despite a return of colder-than-normal temperatures to the eastern half of the United States. In addition, the Mid-Atlantic region, which is still digging out from as much as 35 inches of snow from a weekend storm, is expected to see another 10 to 20 inches Tuesday and Wednesday, according to the National Weather Service.

Some traders think the bulls “overcooked” the market in morning trade. “As we approached $5.700, I think some traders took a step back and looked at the big picture. Sure there is the returning cold, which is increasing gas demand for home heating, but the elephant in the room is still the storage situation,” said a New York broker. “We still have almost 200 Bcf more in storage than we did last year at this time. We also have 150 Bcf more right now than the five-year average inventory. In my opinion, this cold needs to stick around for the rest of February and into March to put storage levels on the defensive. If those surpluses become deficits, then the bulls will have a much easier time pushing futures higher. My problem with that scenario is I’m just not sure we can stay cold enough, long enough.”

Citi Futures Perspective analyst Tim Evans sees some pushing and pulling in the market in the weeks to come. “The natural gas market is probing the upside, with enough current and projected near-term heating demand to keep some upward pressure on prices,” he said. “The market seems to be encountering some opposition, though, which suggests that some traders seem happy to sell into the rally, perhaps convinced that the cold will not be that intense or last that long, although temperatures look as though they will be consistently below normal in the eastern U.S. straight through Feb. 22, with no promises as to what might follow. With the support of that forecast, we see prices making an eventual push up to $6 or more, with some short-covering from the skeptics as part of the flow.”

As if the big snow dump over the weekend was not enough, weather bulls can look forward to another round later in the week if weather forecasts prove correct.

“People across the Mid-Atlantic have little time to clean up from the powerhouse snowstorm that dumped several feet of snow and created blizzard conditions across the region over the weekend. Another storm will bring more substantial snowfall Tuesday into Wednesday,” said AccuWeather.com meteorologist Heather Buchman. According to her figures, the next storm could be another big one for Philadelphia and Baltimore. Both of these cities picked up more than 20 inches of snow from the last storm Friday into Saturday. In addition, areas farther north could get hit this time.

“This next storm could also be significant for areas farther north, including New York City, that escaped most of the heavy snow over the weekend. If all the right ingredients come together, snowfall totals could reach a foot or more from Philadelphia to New York City Tuesday into Wednesday,” she said.

From an energy usage standpoint, heating requirements are expected to be above normal for the Mid-Atlantic and Midwest. The National Weather Service forecast that for the week ending Feb. 13 New England would have to endure 275 heating degree days (HDD), or two more than normal, and New York, New Jersey and Pennsylvania would have 280 HDD, or 26 more than normal. The Midwest from Ohio to Wisconsin was forecast to endure 295 HDD, or 19 more than normal.

Abundant snowfall in eastern markets and cold temperatures notwithstanding , analysts are not convinced that weather factors can be the market drivers they were a month ago. Jim Ritterbusch of Ritterbusch and Associates admits that “this week’s patterns are looking colder than previously expected and continue to extend across a broad portion of the country. However, sustaining price rallies toward last month’s approximate $6 level could prove problematic since much of the upcoming below-normal temperature patterns were efficiently discounted last week via this market’s ability to disconnect to the upside away from the plunging oil values. We also believe that the heavy weather-related usage is losing much of its gusto at this advanced stage of the winter.”

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