Light short-covering buoyed the futures market at the openFriday, as traders exited positions ahead of the holiday weekend.However, sellers above the $1.80 level were waiting and pushed theprompt month to a lower close. The February contract slipped 1.3cents lower to close at $1.796 in Friday’s abbreviated tradingsession. The New York Mercantile Exchange will be closed Monday inobservance of Martin Luther King Day

Now the question becomes whether the market will continue lowerinto expiration. Some sources think the answer to that lies innearby cash trading, which has kept the futures market from fallinglower despite the bearish storage outlook.

But a Gulf Coast marketer thinks it is storage that could cometo the rescue of faltering cash prices and futures prices. Hethinks low spot prices could serve to discourage withdrawals asstorage holders look to protect the value of their supplies. Thatsupply, he estimates, has been injected into the ground at anaverage cost basis of $2.25. “Rather than pulling from the groundnow, discretionary storage players can buy spot gas for about$1.80, and sell next January [futures contracts] for around $2.35.That will cover their cost of carry and avoid having to take a50-cent hit on their supply. Sure the [spot] market could falllower and possibly tag the $1.50 level, but aside from theoccasional spike, prices have traded within the $1.75-2.25 leveland there’s nothing to suggest that prices won’t continue withinthat range.

But if weather forecasts are any indication, prices might breakbelow the $1.75 level this week. The National Weather Service (NWS)released its latest 6- to 10-day forecast Friday night calling forabove and much-above normal temperatures for nearly the entirecountry Jan. 21-25. Only the extreme Southeast, the Upper Midwest,and the Pacific Northwest will see normal temperature readings, theNWS said

Jeff Manna of Omaha-based Strategic Weather Services agrees withthe NWS forecast calling for generally above-normal temperaturesthis week, but he looks for a changing weather pattern as early asnext week. “I look for an upper level trough formation to start tobring cold air out of Northwest Canada into the Western Plains andUpper Mississippi Valley by the end of the month. That cold airwill then migrate to the East, including the Central Plains andextending to the Ohio and Tennessee Valleys by the first of themonth,” he said. And what about the gas-sensitive areas of the EastCoast? “That’s where it gets a little tricky,” warns Manna. “It isunclear if and when the Eastern U.S. will see some of thosebelow-normal temperatures.

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