Following Tuesday’s minor increase, January natural gas futures sprung higher Wednesday as traders covered short positions and some weather forecasters left the door open for some colder temperatures later in the month. After reaching a high of $7.785, the prompt month dropped down to close at $7.673, still good for a 24.3-cent gain on the day.

“I think Wednesday’s action was more of a short-covering bounce than an attempt at another rally,” said a Washington, DC-based broker. “At the end of the day, we even saw some failing, but the sell-off ran out of time. My bet is that this rally will not hold tomorrow. I think we still have some correcting to do before we are all said and done on the downside. Looking back at how all of this has played out, we ended up not quite getting up to my target of $9.250, but we got to $9.050. We then saw a significant sell-off.”

The broker noted that weather still rules the market. “I have not seen any significant changes in weather forecasts that would alter the next two and a half weeks of experiencing above-normal temperatures through much of the country. Some forecasts are calling for a little bit more cold just before Christmas, but we will have to see if it materializes.”

Meteorologist John Dee expects temperatures in the 11- to 16-day period to run close to average across most of the U.S. “It’s possible that temps across the central U.S. could run a bit below average, but still no bitterly cold air is indicated to invade the Lower 48 in this time frame.” Confidence in the 11-to-16-day forecast is average, he said.

AccuWeather sees a somewhat different picture in that time period. It forecasts below normal temperatures for a vast area over the center and western portions of the country. An area extending from Washington state east to the Great Lakes and South into New Mexico and Arizona is expected to be below normal. The East Coast states and the eastern half of the Gulf Coast states are expected to see above-normal temperatures.

With the rest of December mostly written off as normal or warmer than normal, the task of rapidly drawing down storage supplies now falls to January. “With the cold weather possibilities for December pretty much over, we still have January to face,” the broker said. “While we are in a warm pulse right now, we may still have a cold pulse to come in January, which is still the teeth of winter. That’s not like you’re talking about a cold pulse in March, where there really isn’t much left to it and it is unlikely to spike the market that much.”

Looking at this Thursday morning’s storage report for the week ended Dec. 8, the broker said that while he expects the Energy Information Administration (EIA) to report a significant withdrawal, it likely will not be enough for the market to take notice. “All indications are that we will get a decent size withdrawal, which flies in the face of the current weather forecast,” he said. “However, because a large withdrawal is expected, we would need to see something really out of the ordinary to shock futures higher.”

According to a Reuters survey of 21 estimates, industry players expect storage inventories to fall by 150 Bcf with a range of expectations running from a 130 Bcf withdrawal to 178 Bcf. The ICAP storage options auction Wednesday resulted in an expected weekly storage withdrawal of 159.2 Bcf. The number revealed Thursday morning will be compared with last year’s mammoth 182 Bcf withdrawal and the five-year average pull of 110 Bcf.

Traders are also keeping a close eye on the March-April spread as an indicator of future price direction. “The March-April spread is getting punished. Traders are selling the March-April spread at about 8 cents and if the spread were to flip with March below April, that is when prices would head a lot lower,” a New York floor trader said Wednesday morning. March futures settled 8.2 cents above April on Tuesday, but widened the gap to 12.5 cents on Wednesday.

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