Responding to private weather forecasts early yesterday callingfor continued cold weather in the Northeast, market buyers showedtheir muscles at the starting gate and followed through with strongruns in both futures and cash. February cash prices at the HenryHub were approaching dime increases while March futures soared 13cents to $2.662, a smidgen off its high for the day of $2.675. TheApril contract was up 10.4 cents to $2.605, just under its high of$2.610, and May drove 7.7 cents higher to $2.575.

Ed Kennedy of Pioneer Futures said he was surprised by the cashand futures spikes because temperatures are moderating in theNortheast. But some independent weather forecasters and severalin-house utility meteorologists came out early Monday calling for areturn to very cold weather next week in the Northeast. “Two ofthem are saying coldest [temperatures] of the season [will arrivenext week]. The National Weather Service totally disagrees, as doesJon Davis at Smith Barney.” Nevertheless, Kennedy said the bullishforecasts caused some “nervous buying” initially yesterday morning.

“The same people who are buying cash are buying the [futures]board. We had good trade buying all day. Locals got caught shortearly and then got religion and started buying ahead of the tradebuying,” he said. “It was a very impressive performance especiallyclosing over $2.66.

“The real major breakout would be above $2.715, and I can tellyou they are going to test it tomorrow if they don’t test ittonight. I think they are going to see what this puppy is made of.”However, Kennedy said he would be very surprised if March closedover $2.715. “One would assume that gas demand would be lower inMarch than in February,” he noted.

“If we fail on this rally, I would expect this market to comedown and come down hard,” he said, adding that if prices closebelow $2.48 they probably will plummet.

Cynthia Kase had a similar lack of faith in the upswing.”…[A]ny move to the upside, barring extremely severe protractedweather, should be relatively anemic. The patterns tell us that itwill take prolonged, exceptional weather for a bullish run to ensuesoon…. We can also conclude that a relaxation to the $2.30sshould still ensue on an abatement in weather.”

The National Weather Service’s six- to 10-day forecast releasedyesterday was mixed. Normal temperatures were forecast for theMid-Atlantic, Pacific Northwest and inland in the Southeast andMidcontinent, with below normal temperatures along the Atlanticcoast, in New England and in the Southeast. The upper Midwest isexpected to see above normal temperatures as is Texas and theSouthwest with much above normal temperatures over most of Arizonaand New Mexico.

Storage could be a bullish factor later this week given recentcold temperatures, which most likely led to a significantwithdrawal. Last year during the same week, only 78 Bcf waswithdrawn, which will make a large withdrawal appear even moresignificant. The average withdrawal for that week is 150 Bcf. Lastweek’s withdrawal was a whopping 195 Bcf. Storage levels as of Jan.21 were exactly 100 Bcf lower than at the same time last year but267 Bcf more than the six-year average.

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