A weekend hangover was apparent Monday as brutally cold temperature forecasts for the East did little to spark near-month natural gas futures higher. The February contract closed out Monday’s regular session at $5.542, up only 2.6 cents from Friday’s finish.

Citi Futures Perspective analyst Tim Evans said the natural gas futures market is “expressing a complacency” with regard to natural gas supplies, with more concern over the warming trend that is to begin on Jan. 16 than the frigid cold forecast for this week.

Complacency was an adequate term Monday as near-month futures did not show much impetus in either direction. The February contract made a low of $5.370 in morning trade before rebounding to a high of $5.634 just after 12:30 p.m. EST. The contract limped lower for the rest of Monday’s regular session.

“The 11- to 15-day outlook does indeed look benign, much warmer than during a colder period from 2008, but only marginally below the five-year average in projected heating degree days the way it looks now,” Evans said. “We continue to view the natural gas market as relatively undervalued in comparison with storage that is only moderately above the five-year average level.”

Some of the top traders see natural gas prices determined less by current weather factors than by industrial demand. Last week’s thin 47 Bcf withdrawal report for the week ended Jan. 2 caught many by surprise, and some attributed it to the New Year’s Day holiday. However, the shadow of falling industrial demand and a weak economy have the bulls on the defensive.

“The fundamentals for the gas market continue to be negative. An extended cold snap could give us a boost, but it is going to take a significant turnaround in the industrial sector to give gas prices a significant boost,” said Mike DeVooght, president of DEVO Capital, a trading and risk management firm in Colorado.

“It almost feels like we are going to have to see a significant price drop to cause drilling to really slow and product to be shut in before we will see a significant bottom. On a trading basis, we have been looking for (or hoping for) some type of weather-related rally to give us a chance to do some selling in the summer strip,” he said.

DeVooght’s Plan B if there is no weather-driven rally is to establish a price floor in the near future and also implement some collars using options.

MDA EarthSat in its six- to 10-day forecast calls for early cold at eastern points with strong heating demand. “Some very strong heating demand remains across the East early in the period, however, as lows on day six are still expected to be in the single digits on the East Coast,” said Matt Rogers, director. He added that MDA EarthSat’s interpretation of computer weather models introduced the possibility of another quick reinforcing push of cold across the East at mid-period followed by moderating temperatures. “This should be modest in comparison to the earlier cold. The next big story is the scope and longevity of moderation as the warmth moves across the continent,” he said.

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