Natural gas futures continued to knock on the $6 door on Friday as the January contract put in a high of $5.926 in early morning trade. The prompt-month contract ended up closing the day’s regular session at $5.782, up 1.4 cents from Thursday and 61.9 cents higher than the previous week’s close. Over the last two weeks the January contract has gained $1.196.

Traders were still a little shell-shocked from Thursday’s surprise 207 Bcf storage report draw, especially because most of the industry estimates were for a draw of around 170 to 180 Bcf. With more cold weather and winter storms on the way for some regions of the country, some market watchers think the meaty withdrawals could continue.

“As I’ve been saying for quite some time, the only thing that is going to get this market going is cold weather, and I think that is exactly what we’ve seen over the last two weeks,” said Steve Blair, a broker with Rafferty Technical Research in New York. “The massive storage withdrawal in Thursday’s report had a lot of folks recalibrating their strategies and their trading positions. The 207 Bcf draw for the week ending Dec. 11 definitely caught most people way off guard. It was only the third time since the Energy Information Administration began keeping records in 1994 that we’ve had a 200 Bcf draw in the month of December. If we continue to have this kind of weather, we’re going to drop that year-over-five-year average overhang pretty quickly.”

Blair noted that while there is some resistance sitting above the current trading level, another large storage withdrawal will render those prices insignificant. “We have some resistance at $6 and then up at $6.240. However, if we get another big drawdown next week, we’ll move right through both of those price levels,” he said. “The near-term weather forecasts continue to call for cold, so storage is not going to find any relief in the near term. What’s really surprising is we are seeing these large pulls, but industrial demand really hasn’t returned yet.”

The broker said the buying on the week was probably by a mix of participants. “It’s really hard to say who was doing what thanks to electronic trading. I would imagine that there was a good deal of fund activity. Likely some were short-covering and others were extending their length,” he said.

Forecasts are now calling for temperatures to be below normal for much of the United States through the end of the year. The National Weather Service in its eight- to 14-day forecast predicts below-normal temperatures south of a broad arc that extends from Connecticut west to South Dakota and south to New Mexico. Only Maine and California are expected to be above normal.

Other forecasters are more aggressive in their prediction of long-term cold. MDA EarthSat in its 11- to 15-day outlook shows below-normal temperatures east of a sinuous line from Washington to New Mexico with only portions of Minnesota and New England seeing normal temperatures. No areas are forecast to be above normal.

Analysts see continued weather-driven price gains. “Cold weather in the heart of winter (Dec. 15 to Jan. 31) is the primary determinant of consumption, and we clearly have a colder-than-normal trend in place right now,” said Peter Beutel of Cameron Hanover. He asserts that in the absence of any forecasts to the contrary, the bitterly cold weather will continue. “Since the weather is discounted three times — first as a forecast, second as a present reality and third as an influence on storage withdrawals — we must expect the bullish trend to continue,” he said.

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