Despite another blast of extremely cold air and an early price push to the upside, natural gas futures slipped lower Monday as traders reacted to updated weather forecasts confirming that at least a temporary warm-up is in store for much of the country. With that the February contract fell 12.8 cents to $5.396 — its lowest daily close since Jan. 14. At 89,844 estimated volume was light considering it was the third-to-last trading day before expiration-day.

Another blast of cold air was seen across much of the East Monday, pressing prices for next day physical deliveries higher at many locations. New England and New York citygates led the advance, soaring into the low to mid teens on forecasts for temperatures to drop into the single digits Monday night. However, the deep freeze may be coming to an end for folks in the eastern half of the country. A warming trend, which is already raising the mercury levels in the Midwest, is expected to move into the populations centers of Washington, Philadelphia, New York and Boston by midweek.

And while the cash market may be waiting until Tuesday or Wednesday to price in this reduction into demand, futures traders were already busy selling futures Monday. After following cash higher and notching a $5.67 high in the first hour of trading Monday, the February contract shuffled lower throughout the afternoon and ended near its $5.37 low for the session.

Looking ahead, the weather outlook is decidedly mixed. While calling for mostly above-normal temperatures in its latest six- to 10-day weather outlook, the National Weather Service predicts a large area of below-normal temperatures in its eight- to 14-day outlook.

Storage is also a source of uncertainty for the market. Based on high heating degree day data accumulations for last week, expectations for this Thursday’s storage report are in the 220-240 Bcf range. If realized, a figure of that magnitude would be bullish as it would dwarf last year’s 112 Bcf decline, as well as the five-year average decline for last week of 142. However, just because the number is bullish doesn’t necessarily mean higher gas prices. Last week the February futures contract shed 21 cents after the market learned that a whopping 210 Bcf was pulled from the ground during the week ending Jan. 17.

With the two largest supply-demand factors in question, the market may look to technical indicators for price direction, at least in the short-run. While admitting that the upward momentum is waning, New Mexico-based Kase and Company does not rule out the possibility of a few more oscillations to the upside. “The most likely case is for March to hold below its high of last week, probably moving no higher than [about] $5.70, and to test lower, perhaps down [to] the $5.10-20 range,” the group wrote in a note to customers Monday.

Should these oscillations to the upside run their course, Kase looks for the March contract to fill in February’s recent $5.85 high. “A transitory emotional reaction could spike prices to $5.93, but we think it will likely take a much more sustained influence to move prices higher.”

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.