One day after breaking below psychological support at $5, March futures values on Tuesday notched their fourth consecutive day lower, leaving market watchers wondering what would be in store for the contract’s expiration on Wednesday. The prompt-month contract reached a low of $4.773 before closing Tuesday’s regular session at $4.778, down 11.7 cents from Monday’s finish. With that, the contract has plummeted 66.8 cents over the last four regular sessions.

This week’s slide in March futures is being attributed to revised weather forecasts showing a modest warming in more distant time periods from “below normal” to “normal” and in the case of locations in the very high latitudes a move to “above normal.” In the near term, however, heating requirements in populous energy markets are expected to show wide variations.

The National Weather Service forecast that for the week ending Feb. 27 New England would warm to 221 heating degree days (HDD), 29 fewer than average; and New York, New Jersey and Pennsylvania are anticipated to see 229 HDD, or two fewer than normal. The Midwest from Ohio to Wisconsin is forecast to see 265 HDD, or 20 more than normal. Other parts of the country are expected to see more cold. The eastern South-Central region is forecast to endure 165 HDD, or 26 more than normal; and the western South-Central region is forecast to shiver under 129 HDD, or 41 more than normal.

“The natural gas market is moderately lower on updated 11- to 15-day forecasts that look noticeably warmer than the ones from Monday afternoon,” wrote Citi Futures Perspective analyst Tim Evans in a note to clients Tuesday. “As the decline of the past two weeks was already predicated on the idea that a spring warm-up was coming, this shift in the outlook is not hitting prices hard, but it does leave the downside open going into…[Wednesday’s] futures expiry,” he continued.

Analysts see cold weather’s impact on storage levels as gradually losing its power as a price-driver. “The larger-than-expected price decline backing up to the release of last Thursday’s storage report appears to be closing the books on this year’s heavy consumption period as fresh shorts are currently seeing few hazards to a bearish position in this market,” said Jim Ritterbusch of Ritterbusch and Associates. He added that the “fundamental balances have undergone a major renovation thus far this year, and traders appear confident in the ability of storage levels to rebuild at a faster than normal pace during the April-through-October time frame.”

However, after four down days, Evans does not rule out the possibility that traders looking to close out their short positions will ultimately rule expiration-day activity. “In contrary fashion, we could also see a bit of last minute short-covering that could lift March simply as a function of the remaining order balance on the expiring contract, more or less independent of anything going on in the physical fundamentals.”

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