Bullied by sudden and seldom-seen agreement between private and governmental weather forecasting agencies, natural gas futures spiked higher Wednesday evening and Thursday as traders initiated long positions they had liquidated over the past several weeks. Nymex reopened with a bang at 7 p.m. EST Wednesday evening as prices rebounded more than a dime off Tuesday’s $4.789 close.

Then, after trading in the $4.90s throughout the overnight Access session, February futures were goosed higher again Thursday morning as more buyers entered the fray. Light profit-taking ahead of Friday’s storage report was seen in the afternoon. February finished at $5.251, up 10% or 46.2 cents for the session.

According to Salomon Smith Barney meteorologist Jon Davis, near normal heating needs for the first week in January will give way to another blast of cold air in the second week of the month. “The temperature trends during the second week of January are going to change dramatically as major-league Arctic air plunges into the country,” Davis wrote in a note to customers Thursday. “This will, by far, be the most significant intrusion of Arctic air into the lower 48 so far this winter; it is much stronger than anything that moved into the U.S. all of last winter” (see related story).

And to say that the blast of cold air expected in mid January will be the coldest so far this winter is significant, considering how cold it has already been. According to New York-based Weather 2000, the three-month period from October through December was the second coldest in 13 years for Boston, Hartford, Baltimore, Washington, D.C., New York and Pittsburgh. Meanwhile, cities such as Philadelphia, Detroit, Cincinnati, Memphis, Jacksonville and Tampa registered their third coldest fourth quarter in the 13 years.

While private forecasters have done a decent job thus far this winter of forecasting the below normal temperatures in the eastern half of the country, the National Weather Service has not. Instead, the NWS — which has less discretion as to which of the many forecasting models it may use — has repeated called for above normal temperatures in its widely used six- to 10-day and eight- to 14-day outlooks.

Looking ahead, however, even the NWS is on board with Davis for the upcoming Siberian Express. While calling for above normal temperatures for much of the country in its six- to 10-day forecast, NWS looks for below normal temperatures over the eastern half of the country for the Jan. 9-15 time frame. Only California and the Southwestern corner of the country are expected to see above normal temperatures during that period.

If these forecasts play out as expected, the effect will be seen if a few weeks in the weekly storage report, released each Thursday by the Energy Information Administration. At 2,540 Bcf, storage is already 575 Bcf below year-ago levels and 80 Bcf less than the five-year average for this time of year. And while recent withdraws suggest that a withdrawal figure of 200 Bcf or more is possible in a few weeks, most estimates call for a more modest figure when the EIA announces last week’s storage figures this morning at 10:30 a.m.

Noting that his confidence for estimating storage withdrawals is shaky after overshooting last week’s release, Kyle Cooper of Salomon Smith Barney looks for a draw between 129 and 139 Bcf, versus a 126 Bcf takeaway from a year ago. “Last week’s report indicated a rather dramatic shift in the relationship of the actual report in relation to the model estimations and resulted in our estimation being high for the first time in many weeks…Considering the weather forecasts, we have not initiated any length, but do still consider the supply-demand balance to be in a bullish situation,” he wrote in a note to customers Tuesday.

In daily technicals, Tim Evans of IFR Pegasus in New York sees resistance first at $5.33. A break higher would put February on track to challenge its high from December at $5.47. “Provided the market reaches these levels ahead of the cold’s arrival, higher targets may be possible, with the $5.71 spot high from March 2001 as the next candidate,” he wrote in a note to customers Thursday. On the downside, the sharp upward reversal in February leaves behind a vast assortment of failed resistance levels that now become support, Evans continues. Specifically, he sees buying at $5.06 followed by psychological support at $5.00 even. Tuesday’s $4.72 low from Tuesday stands as long-term support, he reasoned.

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