Cash prices on average fell 3 cents overall Wednesday as traders put to bed any requirements they might have for the extended holiday weekend. Double-digit losses were posted by California points, but the Northeast and East were mixed. The Energy Information Administration (EIA) reported a withdrawal from storage of 38 Bcf, including a reclassification, which was significantly greater than what the market was expecting. At the close December futures had risen 7.1 cents to $3.903, a new 12-month high, and January was up 7.6 cents to $4.020. January crude oil added 63 cents to $87.38/bbl.

Southern California traders noted that prices have held within a narrow range for the last several weeks. “[SoCal] Border is trading at $3.55 and [SoCal] Citygate is just below index, and prices just seem to be hovering right around that number,” said a Southern California utility trader.

He noted that prices are behaving similarly to last year with different temperature environments. “Last year it was warm [nationwide] and it was cold out here, so the screen fell and Border [prices] kind of held its ground. This year the screen is staying strong, and it’s mild out here but the market is acting the same way. The prices out here seem to be floating around this $3.50 to $4.00 number. Regardless of the screen going up, we seem to be holding those prices even though we have had 15 OFOs for November largely related to Aliso storage.”

He added that there wasn’t much incentive to buy gas even for an extended period such as the four-day Thanksgiving holiday since traders can literally buy gas on the weekend from their cell phone if they need to.

Holiday weekend and Monday gas quotes on Malin slid 3 cents to average $3.56 and gas delivered to PG&E Citygate dropped 11 cents to $3.55. At the SoCal Citygate holiday deliveries shed 11 cents also to $3.68 and at the SoCal Border gas was quoted 12 cents lower at $3.55. Parcels on El Paso S Mainline were flat at $3.64.

Northeast and East points were mixed. At New England points gas at Algonquin Citygate jumped 52 cents to $7.80 yet deliveries to Iroquois Waddington slipped 13 cents to $5.76. On Tennessee Zone 6 200 L holiday and Monday gas was quoted 44 cents higher at $7.65.

Farther south prices were more narrowly mixed. Deliveries on Dominion were 5 cents lower at $3.68 and gas on Tetco M-3 was up 2 cents at $3.94. Deliveries into New York City on Transco Zone 6 rose a penny to $3.95.

Futures traders had to digest an inventory report showing a greater-than-expected withdrawal from inventories. Before the report’s release estimates were lower. A Reuters poll of 20 traders and analysts showed an average 24 Bcf draw but with a range of a decline of 7 Bcf to a draw of 36 Bcf. Ritterbusch and Associates calculated a decline of 23 Bcf, and United ICAP was looking for a withdrawal of 31 Bcf.

Traders were skeptical that the ensuing price rise was indicative of further advances but acknowledged the possibility of additional gains. “Outside of the colder weather, there is nothing to prompt the market [higher],” said a New York floor trader. “I look for [buy] stop loss orders to go off at $4.08 if it gets that high and if it gets to $4.12, that should give the market legs to move higher. Beyond that $4.18 would be the next stop and then $4.20.”

In spite of near-record supplies, analysts see the market as weather-driven. “The NatGas market is primarily in the hands of the upcoming winter weather and how much NatGas is actually withdrawn from inventory. NatGas stocks are now just 0.6% above last year at this time (a major reversals compared to the size of the inventory surplus in early spring of 2012),” said Dominick Chirichella, principal with the Energy Management Institute.

“With the heart of the winter season expecting temperatures about 18-20% colder than last year and almost at normal levels, a considerable amount of NatGas will continue to be withdrawn from inventory leaving a much more normal end of season level in inventory after this winter.” With this continuing normalization of inventories, he sees the market “relatively supported and a test of the technical and psychological $4.00/MMbtu resistance level could occur as early as next week.”

The noon EST Wednesday release of gas storage figures by the EIA was anticipated to show the second withdrawal of the winter heating season. The editors at Energy Metro Desk correctly diagnosed that the report might contain some surprises, either high or low, from the mid-20 Bcf draw widely suggested. “This week the Metro Desk consensus came in at minus 27 Bcf, and the median was [also] minus 27 Bcf,” said John Sodergreen. “However, the spread between the three categories we track made the magic 3 Bcf hurdle, which typically signals an EIA report surprise of 5 Bcf, high or low of the consensus. That said, we may be looking at a 20-21 Bcf draw or a 30-31 Bcf draw.”

Sodergreen, like many observers, is waiting to get a clearer fix on the weather. “[W]ith the jury still largely out on the balance of the winter weather, our current record high that’s being slowly whittled away may just segue into a new record high for the end of the heating season tally as well.”

December futures posted a new 12-month high with Wednesday’s close, and although a solid uptrend is in place, technical analysts don’t seem convinced that the market is not at a seasonal peak. “Despite bearish momentum and sentiment divergence natgas continues to hang in there,” said Brian LaRose, a technical analyst at United-ICAP. “In fact, Tuesday gave a new high close on this advance from the 28th August low. However, despite that new high close there is still momentum and sentiment divergence. And natgas is still well below the $3.950-4.190 zone. So the risk of an imminent seasonal peak has not subsided.”

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