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Weather Seen Somewhat Cooler; January Called Flat

January natural gas is expected to open unchanged Thursday morning at $2.06 ahead of a government storage report that is expected to show gas usage right at long-term norms. Overnight oil markets were mixed.

Traders see a bit more uncertainty surrounding the 10:30 a.m. EST release of Energy Information Administration (EIA) storage figures. "The market this week is once again all over the lot; our Early View Average [Friday] was -59 Bcf, and the range was a whopping -45 to -91 Bcf wide," said John Sodergreen, editor of Energy Metro Desk. "This week, it's tightened up to 20 Bcf wide: -53 to -73 Bcf. Bentek reports this week that it sees both high- and low-side risk inside the various storage zones. The Big B says its flow model came in at -66 and its S/D Model was lower at -60."

Last year, 47 Bcf was withdrawn and the five-year average comes in at a 65 Bcf pull. The Energy Metro Desk Survey showed a 62 Bcf average, and a Reuters survey of 26 traders and analysts showed an average 64 Bcf withdrawal with a range of -48 Bcf to -75 Bcf. PIRA Energy expects a decline of 62 Bcf, and industry consultant Genscape calculated a 69 Bcf pull.

Overnight weather models backed off somewhat from the extreme warmth forecast through the weekend, but longer-term forecasts still show the East and Midwest above normal. Commodity Weather Group in its Thursday morning report said, "[T]he models continue to bounce around a bit more in the 11-15 day currently, [but] they at least all agree that the pattern downshifts cooler after the super-warm one- to five-day situation that features coast-to-coast warm weather and super-above-normal temperatures at times for the Midwest, East and South. The six-10 day still cools from the West to the Midcontinent with the Southwest and California seeing some additional cooler to colder changes today, but getting that cooling to the East continues to be problematic."

Market technicians are looking for a classic double-bottom formation to stem the price trend lower. "We have spent the past several days focusing our attention on the January contract. And rightly so. But with key support for the spot contract now just below we must shift our attention back to flat price," said Brian LaRose, a market analyst with United ICAP.

"To have a shot at a longer period of consolidation, we need to see a double bottom into the $1.948 vicinity. Failure to double bottom will tell us that we have a five-wave decline off the $2.460 high [and lower prices still] on our hands."

In overnight Globex trading January crude oil fell 41 cents to $36.75/bbl and January RBOB gasoline added 4 cents to $1.2682/gal.

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