After gapping higher at the opening bell and quickly filling in a gap from the daily bar chart, natural gas futures shifted lower Wednesday as traders positioned themselves ahead of what could be another bearish storage report this morning. Although the price direction was down most of the day Wednesday, the absence of strong selling allowed the market to escape the session with a modest gain. February finished at $5.161, up 3.4 cents for the day. Volume was moderate, with an estimated 86,303 contracts changing hands.

Traders surveyed by NGI were not surprised by the market’s lack of direction. After dropping 40 cents on Monday, the February contract rebounded 19 cents Tuesday. Those traders who were not stopped out by the wide price swings of the previous two days spent Wednesday looking for a way off the out-of-control price roller coaster. Sellers were seen above the $5.21 level, which corresponded with the top of the gap left from Monday’s lower open. Buyers, meanwhile, were happy to re-establish long positions on the retracement back below $5.10. “Buying dips has paid off before and you saw locals do just that as prices neared the $5.00 mark,” a Houston trader said.

The inconsistent trading direction can also be attributed to the market’s lack of a firm grasp on this week’s storage report. Withdrawal estimates have ranged anywhere from 98 to 160 Bcf. Most observers expect a withdrawal in the 100-120 Bcf range, which if realized would not only fall well below last year’s 199 Bcf draw, but also short of last week’s lower-than-expected 123 Bcf takeaway. The five-year average withdrawal is 157 Bcf.

Coming in at the low end of the spectrum with a 98-108 Bcf withdrawal prediction is Kyle Cooper of Salomon Smith Barney in Houston, who has done a good job thus far this season of nailing the report. “On a temperature-adjusted basis and considering the holiday, any draw exceeding 100 Bcf would still be considered bullish, even if not bullish from an absolute standpoint,” he wrote in a note to clients Wednesday. “Once again, a draw of over 200 Bcf is considered likely in the coming weeks based on current weather forecasts.”

At the other end of the spectrum is Tim Evans of IFR Pegasus in New York who looks for a 140-160 Bcf drawdown when the Energy Information Administration releases its estimate Thursday. While Cooper feels a takeaway in the low 100s would be bullish, Evans feels a withdrawal of 150 Bcf would be bearish as it would fall short of historical comparisons. “We see this storage report as a useful litmus test for the market. If the back of the market is not broken by the data, then it will be free to trend higher based on the cold,” Evans said.

However, the storage report may not be the show-stopper it usually is on Thursday morning. Possibly upstaging the inventory report are updated weather forecasts released by private forecasters Thursday. Last week the market was taken for a 46-cent ride following predictions for a “Siberian Express” of cold air to flow into the lower 48 states by mid-month.

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