Even though December natural gas futures ran up to a new high for the move at $8.250 on the Energy Information Administration’s (EIA) natural gas storage report of a 7 Bcf withdrawal, the contract ended up collapsing back below the psychological $8 barrier for the fourth time in a little over a week, settling at $7.955, up 13.2 cents on the day.

Coming in a little more bullish than many expected, the 7 Bcf storage withdrawal reported by the EIA for the week ended Nov. 3 appeared to be all that was necessary for traders to finally punch December natural gas futures through the psychological $8 level for good. After trading at $7.850 just prior to the 10:30 a.m. EST report, the prompt month was off to the races. Just after 11:30 a.m., the December contract had soared through $8 resistance to put in a new high of $8.250. However, the move did not hold as futures slipped lower in the afternoon.

The $8 level has been a stumbling block for bulls since the December contract became the front month. The $8.040 high from Wednesday’s regular session marked the third time in the last seven days that the prompt month has been rebuffed from the $8-plus level. Last week, December natural gas put in regular session highs on Thursday and Friday of $8.020 and $8.050, respectively, sparking significant selling both times.

“I think the 7 Bcf draw played into the morning’s jump higher because most industry estimates had been expecting a slightly smaller pull,” said Steve Blair, a broker with Rafferty Technical Research in New York. “It was a little more of a withdrawal than was expected, so I am sure that didn’t hurt, but I really think the market was just looking for a reason to test higher again.

“That is the fourth time we have broached the $8 level and failed. Every time we get up there people sell into it. I am actually a little surprised that the market did not sell-off a little bit more when it got back under $8,” he said. “Like the other recent penetrations of the $8 level, I was expecting a pretty good pop lower to follow, which never really materialized. Each time we get above and fail it appears that the downside reaction is not as great. On the flip side, once we got up to $8.250, I thought we had a real chance of getting up around our first real resistance area around $8.400.”

Regarding independent weather forecasts of some “Arctic cold” coming into the country next week, Blair said it would need to be sustained cold in order to make an impact on the market’s current dynamics. “As long as we keep getting just a couple of cold days at a clip, I really can’t see it eating away at storage in any meaningful way or giving bulls any reason to pounce,” the broker said. “I look at the close below $8 Thursday as a bit of a failure in the market.”

Another broker said that even though the market’s reaction to the storage report was decisive, he is not yet sold on whether there will be any follow-through buying. Jay Levine, a broker with enerjay LLC, said that while a 7 Bcf withdrawal was “basically what the market was anticipating,” somebody forgot to “tell that to December natural gas, which has cut through $8 like a hot knife through butter.”

Levine added that the market currently appears conflicted. “While the initial reaction following any report is often suspect — and reversals are still possible — I suspect the recent action is merely a continuation of the recent concerns, and recent bullishness, which the market is grappling with in light of existing (and bearish) supply and fundamentals.”

The other bullish aspect of the report is the fact that it marked the second withdrawal of the season. Most traders had been expecting to see a withdrawal, albeit a smaller one than the previous week’s 9 Bcf pull. A Reuters survey of 22 industry players found that the average expectation was for a 4 Bcf withdrawal, while the ICAP derivatives auction held Wednesday afternoon showed a consensus pull of 1 Bcf. After the previous week’s early withdrawal, Golden, CO-based Bentek Energy was also projecting a 1 Bcf withdrawal for the week.

The 7 Bcf withdrawal was seen as bullish when compared to historical data sets for the week. According to the EIA, last year’s report for the similar week revealed a 56 Bcf injection, while the five-year average for the similar week was an injection of 23 Bcf.

As of Nov. 3, working gas in storage stood at 3,445 Bcf, according to EIA estimates. Stocks are still 225 Bcf higher than last year at this time and 246 Bcf above the five-year average of 3,199 Bcf. The East region saw a 10 Bcf withdrawal for the week while the West and Producing regions saw injections of 1 Bcf and 2 Bcf, respectively.

Supportive injection numbers aside, market technicians aren’t buying any bullish argument. Walter Zimmerman of United Energy believes that the natural gas market is showing signs of peaking. “The very high but nontrending volatility of the last three weeks resembles the churning that typically accompanies peaking action, and the seasonal cycle indicated significantly greater downside risk than sustainable upside potential,” he said.

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