Confronted with a bearish storage situation and a bullish weather outlook, natural gas traders opted to follow the guidance of the latter Thursday as they lifted the market off of a negative close to notch the first positive close for the week. The January contract received the biggest buying boost, shuffling 7 cents higher to close at $2.686. Estimated volume of 90,049 was high considering the extremely-tight, 5-cent trading range.

Many traders were surprised by the market’s inability to probe lower Thursday following another in a string of undeniably bearish storage reports. According to the AGA, 45 Bcf was pulled from underground storage facilities last week, bringing total working gas levels down to 93% full at 3,061 Bcf. The takeaway was not only less than the 158 Bcf drawdown from a year ago, but also less than the market’s 50-60 Bcf range of expectations. Total gas in storage now stands at a record 948 Bcf above year-ago levels and 535 above the five-year average.

However, several market watchers were quick to point to medium range weather forecasts as a reason for the price rally. According to the latest six- to 10-day forecast released Thursday by the National Weather Service, below-normal temperatures will cover much of the eastern half of the country next week. In fact, the only areas of the nation expected to see above normal mercury readings are the Pacific Northwest and state of Maine, which will be cold anyway. Normal temperatures are forecast for the remainder of the country, roughly a third of the total land area.

Looking ahead, traders are mixed as to which direction natural gas prices will trend. Despite the high level of storage that will continue to weigh on prices, analysts and brokers are reticent to endorse a full scale liquidation of longs in the $2.60s. I just don’t think that this market is going to get trashed,” offered Jay Levine of Advest Inc. ” I want to be a seller, but I’m not sure I want to be short natural gas right now at $2.60.”

Instead, Levine is suggesting that end-users look to take advantage of the market’s range-bound trading action while protecting against an upside move by entering into a costless collar. “I would look to sell the $2.30 February put and buy the $3.20 February call.”

On the other side of the fence sits Tim Evans of New York-based IFR Pegasus who believes the bulls are trying to make lemonade using just a bunch of lemons. “[Thursday’s] upswing, although unexpected, does work to confirm resistance in the $2.70-71 area, ahead of recent highs at $2.73 and $2.75. A break below $2.65 will put pressure back on [Wednesday’s] $2.59 low, with new lows fully hardening the $2.70 opposition.

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