Natural gas futures took advantage of a supportive inventory report and worked higher Thursday in active inventory report-driven trading. The Energy Information Administration reported that 245 Bcf was drawn from storage for the week ended Jan. 15, somewhat more than estimates in the 215-230 Bcf range. At the close February futures rose 11.9 cents to $5.615 and March gained 10.1 cents to $5.568. March crude oil fell $1.66 to $76.08/bbl.

“The number was ahead of expectations, and I think that’s why you are seeing it higher,” said Eric Bentley, a trader with Viking Energy in New York. He added that he thought a lot of the black box algorithmic traders were “looking to sell any kind of pop” and the market would come in lower Friday.

In spite of the hefty storage pull, analysts still see the market amply supplied. “There’s no doubt that there is plenty of gas,” said a Houston analyst. “I’m a little surprised that the 245 number is driving the market up; I think that is combined with weather reports showing a little cooler conditions, but those are not showing me anything that is abysmally cold in February. I know that there are a lot of people out there who have an idea that February is going to be very, very cold. I think that is why you are having a re-emergence of market strength.”

He added that the cold forecasts seemed to be predicated on a re-emergence of the blocking patterns caused by the Arctic Oscillation (AO) and the North Atlantic Oscillation (NAO), weather patterns that keep accumulations of arctic air directed into North America instead of moving to the East (see related story). “A weather call like that is something of a long shot, but there are those out there that like to take long shots,” he said.

The analyst noted that with the days now getting longer sustained cold in Texas after President’s Day was unlikely. “Minnesota can stay cold until May, but each day you are adding a couple of minutes of daylight.”

He felt that the market should start watching production data more closely. “The rig count is up smartly from its lows and those who were calling for a massive supply shortfall are going to be greatly disappointed because it isn’t materializing. They are being pressed to explain why production isn’t falling.”

Data from the Baker Hughes Inc. rotary rig count shows that for the week ended Jan. 15 the number of rigs looking for gas jumped by 30 to 811. That is down 424 from a year earlier but up smartly from the low posted in July of 665 rigs.

In spite of the weather-driven 245 Bcf pull, others are not convinced that even if the AO and NAO return that the market can continue higher.

“In the last 48 hours we have seen some real negative economic news. We had a bad housing starts report yesterday, more jobless claims report today, and the Dow Jones Industrial Average is down nearly 200 points. That, combined with the growing perception that it is getting easier and easier to find natural gas in the unconventional plays that exist here domestically, and you have a fairly negative price picture. We saw that $6.00-6.20 was a tough nut to crack the last time we were up there. That should continue to present firm resistance above this market,” a Washington, DC-based analyst said.

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