To say the weather had an impact on the natural gas futuresmarket last week might be the biggest understatement of the newmillennium. After all, not a day went by that neither forecasters’predictions, nor ever-changing weather itself did not play intotraders’ decisions. Add to that the fact different independent andgovernmental forecasting agencies were not always in agreement. Itall came to a head last Friday when prices soared early in the dayin anticipation of the return of cold temperatures in the Northeastfor the weekend, only to come crashing down that afternoon upon therelease of a fresh medium-range forecast for this week. The Marchcontract was the hardest hit by the sell-off, tumbling 2.2 cents tofinish at $2.57 Friday. Less dependent on the near-term forecast,the outer months managed to hold onto small advances into theclose.

Even as temperatures in the Northeast were expected to cool offfor the weekend, a new blast of warm air, welling up from Mexico,was expected to moderate temperatures this week. According to theNational Weather Service, the entire U.S. except the PacificNorthwest, Montana and Northern Maine will experience above-normaltemperatures Feb. 17 – 21.

“[Strong] cash prices can only do so much,” said a Houston-basedtrader about the expectations for moderating temperatures. HenryHub prices held their own [Friday] and traded pretty much flat to[Thursday] regardless whether [March] futures were trading at a$2.56 or a $2.65. We saw convergence between cash and futures forthe first time all month [Friday]. Now that their paths havecrossed, it will be interesting which one takes the lead,” hemused. Henry Hub prices for the weekend were up a penny at anaverage price of $2.65.

Although they took a back seat to the weather news, technicalswere also at work last week. For many traders the $2.63 level,which represented a 50% Fibonacci retracement between the $2.78high from the week prior and Tuesday’s $2.475 low, was pivotal. TheMarch contract was able to break through that level to post a$2.665 high Friday, but ultimately closed well below that level.

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