February natural gas futures retreated Tuesday as traders had to navigate both a strong dollar and seasonal analyses showing a deferral of the preseason low by up to two months. February futures skidded 15.9 cents to $4.642 , and the March contract dropped 18.2 cents to $4.631. The expiring February crude oil contract enjoyed last-minute buying and rose $2.23 to $38.74, but more distant contracts fell.

Energy and other commodities prices were under pressure as the U.S. dollar rallied. Commodities and commodities futures contracts are often purchased as a hedge against a U.S. dollar that loses purchasing power, but the reverse is true in conditions where the dollar strengthens. IntercontinentalExchange reported that the March U.S. dollar index futures contract rose a hefty 1.570 to 86.935.

Analysts are now looking for the seasonal low in natural gas prices to occur much later than normal. “It looks like the seasonal cycle low may be put in during the late February, March or even early April time period,” said a New Jersey-based analyst. He said he looked for it to be very late because of the Elliott Wave count in natural gas, and judging by the big move up in the dollar “there could be some more deflation on the way. Natural gas looks very weak at this point.”

He went on to say that he expected a bottom in the natural gas market between current levels and “a low $4 handle, but I think it’s only going to be temporary. I think it’s going to chug sideways for another week or two and then we get another pop to the downside in March or April.”

“We normally look for the seasonal cycle low to be put in between Feb. 2 and Feb. 10, but on the whole it’s going to come much later due to the whole deflationary environment we are experiencing in the economy right now.”

The state of the economy has not passed unnoticed by risk managers. “The gas market is in a real pickle here. Our thought last week that it feels like the market might have to break sharply to cut drilling looks like it might come to fruition sooner rather than later,” said Mike DeVooght of DEVO Capital, a Colorado-based trading and risk management firm. In DeVooght’s eyes new gas capable of coming on-line is going to require increased demand to change price direction. “At this time we feel the U.S. economy is mending and will rebound from its current depressed state. The demand for the industrial sector is going to be slow to rebound.”

Slow rebound or not, producers needing to lock in reasonable prices may not be able to wait for the industrial sector to improve. “On a trading basis, we have been looking for (or hoping for) some type of weather-related rally to give us a chance to do some selling in the summer strip. Unfortunately, we have not had one. If we do not get a rally soon, we will look at establishing some floors and/or collars in the near future. If you are on the edge of your production cost levels, you should consider buying some slightly out-of-the money puts just in case this market does not give us a rally to establish a position at a more attractive level,” DeVooght said in a note to clients.

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