Natural gas futures bulls on a three-day 65.5-cent run higher ran into somewhat of a wall Wednesday after putting in a $5.230 high in the overnight Tuesday trading session. Despite the frigid winter storm currently battering a number of U.S. regions, the January contract during Wednesday’s regular session put in a low of $4.880 before closing out the day at $4.898, down 21.6 cents from Tuesday’s finish.

Wednesday’s turnaround could be blamed on the overnight run-up near resistance at $5.318, which was recorded in late October and stands as the spot month high for the move. Some market watchers saw the pullback as natural following a significant rally, especially ahead of fresh storage data that is surrounded by uncertainty.

“The natural gas market is taking a step back from the recent rally with some profit taking ahead of Thursday’s [Department of Energy] storage report, amid some whispered numbers that storage withdrawals might amount to just 40 Bcf or so, well below our own 60 Bcf estimate and clearly bearish compared to the 90 Bcf five-year average for the date,” said Tim Evans, an analyst with Citi Futures Perspective in New York.

Evans noted that any jump in the current 487 Bcf year-on-five-year average surplus would put the market “in that much more confident a supply position” at the start of the current cycle of cold. He added that Wednesday’s temperature forecasts “can’t be blamed” for the price retreat as Wednesday’s six- to 10-day and 11- to 15-day forecasts were both cooler than their Tuesday counterparts.

For the moment analysts see natural gas as a one-dimensional market focused entirely on weather. “The buying [on Monday and Tuesday] has seen the bulls come back to life. The desire to buy has been clear, again. The great hope is that colder weather will eat into record high storage figures,” said Peter Beutel, president of Cameron Hanover. It is Beutel’s contention that the cold weather will not be enough to offset lost industrial demand, but “for now, hope is powering prices higher. Left to its own devices, this market prefers to react to weather first and foremost.”

Forecaster WSI Corp. of Andover, MA, expects colder-than-normal temperatures to prevail from mid-December through Christmas Eve for much of the country. South of a line from Maine to southeast Wyoming to Southern California is expected to be below normal. “Colder-than-normal temperatures are forecast over most of the central and eastern U.S. Anomalies as cold as eight to nine degrees below normal are anticipated over the Mississippi Valley. Warmer-than-normal readings are forecast over the northwestern U.S.,” the forecasting firm said.

Taking a closer look at Thursday morning’s natural gas storage report for the week ending Dec. 4, it appears the only thing industry insiders can agree on is that the first withdrawal of the season will be witnessed when the Energy Information Administration releases its data at 10:30 a.m. EST.

A Reuters survey of 24 industry players produced a draw expectation range of 29 Bcf to 73 Bcf with an average draw estimate of 46 Bcf. Bentek Energy projects a 40 Bcf withdrawal, which would bring inventory levels to 3,797 Bcf. In addition to being compared to the 90 Bcf five-year average pull, the number revealed Thursday morning will be compared to last year’s 66 Bcf draw for the similar week.

Bentek said with the amount of gas currently in storage, the natural gas industry could find itself with record levels at the end of the withdrawal season.

“Low demand due to the Thanksgiving holiday weekend results in a 40 Bcf withdrawal, 10 Bcf below the Bentek weather model indicated by StorageCAST,” Bentek said in its weekly storage note. “The current weather forecast is indicating colder temperatures for the next two storage weeks with above-average withdrawals expected. Storage inventories begin this year’s withdrawal season at 3.8 Tcf. Historically, net draws through the end of the heating season in March total approximately 2 Tcf. A 2 Tcf draw would result in season-ending inventory levels of 1.8 Tcf, 400 Bcf higher than the 1.4 Tcf five-year average and 100 Bcf higher than the record high 1.7 Tcf reported last spring.”

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