After moving to either side of unchanged, the natural gas futures market finished in slightly positive territory Wednesday as concerns over a large storage number edged out forecasts calling for wide temperature swings over the next couple of weeks. At $6.387, the February contract was up 5.8 cents for the session, but well below its intra-day high of $6.58. At 70,004, estimated volume was moderate.

The last two storage reports have featured smaller-than-expected storage withdrawals (52 Bcf and 80 Bcf respectively), but traders are bracing for a bullish surprise Thursday. Consensus estimates are centered on a draw of 160-165 Bcf, with a wide range of expectations spanning 125-200 Bcf. Last year the market drew 136 Bcf from the ground and the five-year average stands at a 141 Bcf draw.

“There is still a great deal of uncertainty regarding our [160-170 Bcf withdrawal] estimation, as this report will no longer have a ‘holiday effect’,” wrote Kyle Cooper of Citigroup in a note to customers Wednesday. “A draw as large as 180 Bcf would not be completely shocking. A draw below 160 Bcf would be considered incredibly bearish.”

His bearish slant is based on a combination of fact and forecast. “Weather forecasts will also remain vital, but from a strict calendar standpoint, the winter is approximately half over. February can still be very cold as was very evident last year. However each day that passes increases the need for significant temperature anomalies to develop to reduce inventory levels,” Cooper continued.

The latest medium-range forecasts show that the cold-mild-cold trend is likely to continue. While calling for a large swath of below-normal temperatures in the latest six- to 10-day outlook, the National Weather Service predicts above-normal mercury readings for roughly the same area in its eight- to 14-day forecast. Serving as a possible tie breaker to these two disparate forecasts is the large area of below-normal temperatures forecast in the western half of the country for the Jan. 22-28 period. Should these chilly temps migrate to the East as weather in North America so often does, the February bidweek would be conducted under another bullish weather scenario.

In daily technicals, Tim Evans of IFR Pegasus in New York views the $6.20-58 area as a pivotal range going forward. “On the downside a break under $6.20 takes aim at the $6.00-$6.05 lows from December 23-31 or even the $5.94 spot floor from that era.” However, Evans is betting on the bull in this market and is long from $6.35 with a sell-stop placed at $6.19 to limit his losses. Should the market break through initial resistance at $6.75-80, Evans does not rule out a challenge to the recent $7.44-63 highs.

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