After starting Wednesday’s regular session significantly higher than Tuesday’s close, March natural gas turned south just after 11 a.m. EST, ultimately testing psychological support at $7 before settling at $7.066, down 4.8 cents.

The prompt month opened at $7.380 before climbing higher to reach the day’s high of $7.440 an hour later, but the move lacked follow-up buying. The resulting move lower broke $7-even to carve out a new seven-month prompt low at $6.975. The last time a prompt month traded lower was on July 1, 2005, when the August 2005 contract reached a low of $6.949.

“It feels to me that everyone knows this market is oversold. It is oversold and due for a correction,” said Eric Bolling, a Nymex local trader. “I think you can expect a short-covering rally, but I don’t think you can really get bullish on this thing. If we do get a short-covering rally, I think traders are going to come after the months of next winter instead of the front months. There is really no reason to try and get long March or April in through here. Now the play is next winter. They’re not going to get too bearish there, so if you are going to come buy something, you might as well buy those.

“While we may get some pop in the summer months, you’re really throwing the dice on buying it,” he told NGI. “If you buy next winter there is not going to be anyone aggressively pushing it down.”

Top analysts see the decline in natural gas prices abating. “I think we are in a bottoming area,” said Mike Rothman, managing director of ISI Group in New York City. “Natural gas will trade off oil and I realize that oil is selling off…but the overall story of capacity being snug remains the [price] driver, and for natural gas there is an underlying issue of domestic supply capacity,” he said, alluding to the overall resource declines and shut-ins in the Gulf of Mexico.

He added that was his rationale why natural gas should trade closer to a Btu equivalent of crude oil. March crude oil futures settled Wednesday at $57.65/bbl or $9.610/MMBtu.

Weather forecasts may lighten the hearts of the bulls. Although the recent storm pounding the East Coast had no apparent impact on the natural gas market, the most recent six-to-10-day forecast by the National Weather Service shows below normal temperatures impacting a much broader area of the U.S. north and west of a line extending from North Carolina to central Texas. South and east of that line is predicted to be either normal or above normal.

Likewise, MDA EarthSat Weather is forecasting the balance of February to be rather cold after this week with an arctic air intrusion attacking the Plains to the East Coast. “This arctic air mass will produce much below normal temperatures to commence late this week,” the forecasting firm said.

Looking at the natural gas storage report for the week ended Feb. 10, Bolling said it doesn’t really matter what the Energy Information Administration (EIA) reports. “Because of some of the weather last week, we might not see too small of a number Thursday morning,” he said. “However, due to the amount of gas in storage, the storage report really is irrelevant. We are well supplied.”

Others seem to agree that the storage report will likely be larger than in the last few weeks. In estimating a 115 Bcf withdrawal, Golden, CO-based Bentek Energy said the report will mark the first one since mid-December with a triple-digit withdrawal. With somewhat colder temperatures last week, Bentek is looking for the East region to pull 74 Bcf, while the Producing and West regions withdraw 30 Bcf and 11 Bcf, respectively.

A Reuters survey of 19 industry players projected an average withdrawal projection of 110 Bcf, while Wednesday afternoon’s ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, zeroed in on a 113.4 Bcf withdrawal for the week.

The number revealed Thursday morning will be compared to last year’s 109 Bcf withdrawal and the five-year average withdrawal of 144 Bcf.

©Copyright 2006Intelligence 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.