March natural gas futures spent much of Wednesday’s session climbing higher, only to collapse in the final hour of regular session trading. The prompt-month contract hit a high of $8.120 before sinking lower to test the $7.700 low for a second consecutive session. Ultimately, March natural gas closed at $7.735, down 12.3 cents on the day.

With the forecasted cold front continuing to have skeptics, including some meteorologists, the solid bearish indicators like near-record gas levels in underground storage and slumping crude futures continued to weigh down natural gas on Wednesday.

“While we failed to get below that $7.70 level once again, the collapse at the end of the day was pretty mighty,” said a Washington, DC-based broker. “We sold off from $8.10 to $7.70 in a matter of a half an hour. It is clear that the run-up earlier in the day really didn’t have much backing behind it.”

The broker noted that crude was gyrating around all day Wednesday. “Although it ran up and sold off a little more gradually, I think natural gas really followed crude,” he added. “Once crude broke, people said, ‘Thank you very much, now I can make 40 quick cents on the downside in natural gas.'” March crude settled 54 cents lower at $62.55/bbl.

“I would say that the market is still very bearish on natural gas,” the broker said. “We have not seen any conviction yet that the downward momentum has been broken. Even when we had the four days of rally recently, it only barely crossed our momentum indicators into neutral territory. The subsequent sell-off just slammed them right back into bearish mode again. If crude comes off again and it heads towards $60/bbl, then I think the low $7 area certainly comes into play on natural gas.”

As for the coming cold pattern that has been hyped for the last two weeks, the broker said it still appears to be out there, but it almost appears “as if we are Waiting for Godot,” he said, referring to the 1950s Samuel Beckett play based on two travelers who wait in vain for the arrival of the mysterious Godot, who never arrives.

AccuWeather.com said cold and stormy conditions could be on tap for the East this weekend…or not. The forecasting firm said computer models show an Alberta Clipper will head from Canada into the Southeast this weekend. According to Senior Meteorologist John Kocet, there are two scenarios that could develop. “In the first scenario the Clipper does not connect with energy from the southern branch of the jet, and the two systems remain weak as they head east through the weekend. In scenario number two the two branches of the jet stream join forces, with the Clipper tapping into moisture drawn north from the Gulf of Mexico. This would spur explosive development of the system as it heads north along the Atlantic coast late on Saturday.”

The meteorologist said in the second scenario, the heaviest snow would fall along the I-95 corridor from the Carolinas and Virginia through the major cities of the Mid-Atlantic states into Massachusetts. “Winds would wrap around behind the system, blowing across the open waters of the Great Lakes,” he said. “This would create another session of severe lake-effect snow in the snowbelt regions south of Buffalo and north of Syracuse, with lighter snowfall amounts likely to fall on interior regions of the Northeast.”

“Natural gas is in a wait-and-see mode, waiting and seeing how low it can go,” said Jay Levine, a broker with enerjay LLC. “As far as support goes, I’d still view either side of $7.70 as initial support…followed closely by $7.50, then $7.25. In keeping with this ‘logic,’ $7 should then be next, although at that point I’d have my sights set on something lower — even intraday should it occur — and $6.75.”

Some market technicians suggest the end to the price downtrend may be in reach. Interviewed prior to Wednesday’s trade session, Walter Zimmerman of United Energy, said, “For the bears, Tuesday made another new low and another new low close. Is a new low close ever a buy signal?” He noted that Tuesday gave “another RSI divergence buy signal, and the ‘Bullish Consensus’ is a very low 32%, a level entirely consistent with a seasonal cycle low.” The RSI (Relative Strength Indicator) is a technical tool which can indicate market bottoms or tops when its direction diverges from the dominant price direction. The Bullish Consensus is a survey of traders asking about market direction, with the idea that most traders are most bearish when prices are at or near a market bottom and conversely for a market high. “And last but certainly not least, natural gas is now at the epicenter of the bottoming window for the seasonal cycle low. So there are clearly a host of warning signals that suggest shorts should be very, very careful down here,” he cautioned.

Early indications for Thursday’s natural gas storage report for the week ended Feb. 3 are for a withdrawal less than previous week’s 88 Bcf pull. According to a Reuters survey of 29 industry players, natural gas storage is expected to fall by approximately 59 Bcf for the week.

Wednesday afternoon’s ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, zeroed in on a 50 Bcf withdrawal for the week.

Whatever the number turns out to be, it appears it will likely add to the current storage surplus over historical analogs. The EIA reported that 178 Bcf was pulled from storage for the similar week last year and the five-year average withdrawal is 158 Bcf.

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