Despite chilly weather forecasts and the possibility of another bullish storage report Thursday, natural gas futures shuffled lower Monday as traders alleviated overbought conditions following last week’s run to new two-year highs.

After trickling lower for much of the session, the market was flushed lower in the last 90 minutes of trading by fund and local selling. March closed at $5.852, down 19.1 cents for the session.

Several market-watchers were surprised by Monday’s price retracement, which came despite another day of wintry conditions for the Northeastern quadrant of the country. Snow fell from Washington DC to Maine Monday, adding to the accumulation left on the ground following Friday’s quick-hitting storm. Cash prices were quick to react to the weather news, with Northeast deliveries advancing as much as a half-dollar Monday. Looking ahead, physical prices may cling to those lofty levels. Aided by the snow pack seen from Virginia north, cold air is expected to hang around and even intensify this week, keeping thermometers at or below the freezing mark.

However, there was a contingent of traders — noting that even in a perfectly bullish or bearish market, there will almost always be a price correction — who expected Monday’s price retreat. Buoyed by cold weather forecasts and Thursday’s storage report featuring a whopping 208 Bcf withdrawal, March futures gained 45 cents last week to notch a new 24-month prompt month high at $6.065. With gains of 18.4 cents Thursday and 21.5 cents Friday, the market had finished the week on a strong note. When bulls failed to make a higher high in early trading Monday, the market was ripe for a sell-off, traders agreed.

Looking ahead to next week, the weather forecast is mixed, which is bearish considering the chilly temperatures being experienced by the eastern half of the nation this week. According to the latest six- to 10-day forecast released Monday by the National Weather Service, below-normal temperatures are expected to continue across the Great Lakes, Mid-Atlantic and Northeast. However, the eight- to 14-day outlook calls for a warm-up, with above-normal temperatures predicted over a large rectangular swath of the country described by corners in Florida, New Mexico, Wyoming and Virginia.

Also the source of some uncertainty is this week’s release of fresh storage numbers. Citing the recent string of hefty withdrawals, Tim Evans of New York-based IFR Pegasus looks for a 200-220 Bcf draw, which would easily surpass the year ago pull of 172 Bcf as well as the five-year average takeaway of 113 Bcf. “With the 811 Bcf year-on-year deficit still expanding, the market is becoming more and more vulnerable to any below normal periods over the balance of the heating season,” he wrote in a note to customers Monday.

But not everyone is looking for another 200+ Bcf storage figure. Having adjusted last week’s heating degree day data, which is sampled through Saturday to mesh with the storage data that is surveyed through Friday, Thomas Driscoll has lowered by 25 Bcf to 135 Bcf, his withdrawal estimate for last week. Kyle Cooper of Salomon Smith Barney, meanwhile, predicts a 150-160 Bcf withdrawal.

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