Despite forecasts calling for temperatures to return to normal,natural gas futures continued lower yesterday as traders pressuredprices to new one-month lows. The February contract was the hardesthit, tumbling 36.9 cents to close at $8.103, a hair beneath theJan. 3 low of $8.14. For the second session in a row, the outmonths remained relatively strong as the 12-month strip only sagged14.3 cents to close at $6.339.

Fresh forecasts for “normal” temperatures were the market’sbiggest fundamental factor yesterday. Although “normal”temperatures represent a departure from the above-normal readingsthat have prevailed across much of the nation for the first twoweeks of 2001, it is not as bullish as the below-normaltemperatures seen through November and December.

According to the latest six- to 10-day forecast released Tuesdayby the National Weather Service, most of the lower 48 will seeseasonal temperatures for the Jan. 22-26 period. The Upper Plains(above-normal) and west of the Rockies (below-normal) represent theonly exceptions.

Also on the traders’ radars yesterday was the weekly storagereport, which will be released by the American Gas Association at2:00p.m. today. Expectations ahead of the report yesterday were fora net withdrawal in the 125-150 Bcf range — slightly less thanlast week’s 167 number, but more than last year’s 115 pull.However, according to New York-based IFR Pegasus, even if theyear-on-year storage deficit (currently at 760 Bcf) rises againtoday, it will likely be the last time it does so for at least acouple weeks. “The year-on-year deficit may stretch another 40 Bcfor so if Wednesday’s report shows the 150 Bcf withdrawal we thinkis possible. But beyond that point, the warmer than normal readingsin the Midwest should mean lower withdrawals than last year,allowing for a growing confidence that storage won’t completely rundry by spring.

“In fact, we now think that the DOE’s December projection of a600 Bcf spring low may not be too far off,” the group wrote in itsJan. 16, 2001 NatGas Report.

Currently, the group is on the sidelines, but wishes toestablish either a short position on a rally, or a long positionnear the lows.

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