Ending a four-day, 21-cent rally, natural gas futures reversed lower Thursday as weak long traders headed for the exits amid bearish weather news. After opening at Wednesday’s high at $2.40, the prompt month took on the trajectory of a safe pushed out of a 10 story building, falling 14 cents in the first 45 minutes of trading yesterday. From that point forward, February checked to either side of $2.26 on a heavy volume of 123,632 contracts. February closed at $2.254, down 14 cents from Wednesday’s settle.

As expected, weather forecasts keyed yesterday’s price action. According to the latest six- to 10-day forecasts released Thursday by the National Weather Service, above-normal temperatures are expected to continue through at least Jan. 27 across the entire eastern half of the country except for New England where normal readings are forecast. But that was only the beginning of the bad news for bulls. With barely enough time to digest that outlook, they were hit with another blow when the National Oceanic and Atmospheric Administration released its 30- and 90-day temperature and precipitation forecasts.

According to NOAA, above normal temperatures are predicted for the month of February for a large portion of the South extending north to a line drawn from Pennsylvania to New Mexico. In the 90-day outlook, the above normal readings are expected to migrate from the South to West.

While most sources polled by NGI believed the forecast was undeniably bearish, one source was ambivalent about the report. “Above normal temperatures in California and New Mexico are bullish if anything. Sure it could be mild in the Southeast during February and that is bearish, but the Northeast is spared of the above-normal temperatures and that is where you get most of your population weighted heating degree days.”

Tom Saal Pioneer Futures in Miami chose to look at the supply side rather than the demand side. “Everybody continues to point to the high level of gas in the ground and I do not dispute that there is plenty of it… The real question is when that gas is going to come out of the ground. Until that time that it comes out of the ground it is only potential supply. What happens if storage players elect to keep the majority of the gas in the ground through February and March and then it heats up in April and May and only then does the gas come out of the ground? In that scenario the winter months would stay relatively strong only to have the summer months get crushed. It could happen,” he said.

For Saal to be correct and storage to continue to be withdrawn during April and May, the market would have to contravene its usual injection season, which typically runs from April 1 to Oct. 31. However, a quick look back to last year will show that the market continued to experience net injections through the third week of November because the weather remained mild and relative price levels made it economically prudent to do so.

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