A casual observer of the natural gas futures market might lookat the narrow losses in the January contract and the modest gainsin the out months and conclude there was a quiet, post-expirationtrading lull in the Nymex pit Wednesday. December lost 8.5% of itsvalue in its last two trading days, and traders were just easinginto trading January, right? Wrong.

In another violent, knee-jerk reaction to the announcement offresh storage news, natural gas futures spiked to $6.50 only toturn right around and drop down to $6.13 yesterday. According tothe American Gas Association, 146 Bcf was pulled from undergroundstorage facilities last week, decreasing total working levels to2,502 or 76% full. Not only was the withdrawal bullish comparedwith the 5 Bcf net injection seen during the same period last year,but it also eclipsed the range of market expectations centered on a90-125 Bcf draw down. According to the AGA, the five-yearwithdrawal for last week is 44 Bcf.

Delving deeper into AGA historical data shows that never beforein the almost 7-year history of storage data has the market pulledso much gas from storage during a week in any month other thanDecember, January or February. In fact, only twice (104 Bcf in 1996and 108 Bcf in 1997) has the market withdrawn more than 100 Bcfduring a week in November.

As those compelling statistics began to set in yesterday,analysts and traders alike were nearly climbing over each other toput in their buy recommendations. The market quickly erupted to$6.50, but after failing to attract additional buying to pressureit above previous continuation chart highs at $6.58 and $6.62,January was slammed lower into the close.

Of all the pundits, perhaps none were as bullish yesterday asSusannah Hardesty of Indiana-based Energy Research and Trading.”The downside correction is over. Confirmed immediately when theAGA’s were released minutes ago.. The [-146] number was bullish ineveryone’s eyes, no matter what happens in the short-term to theweather,” she wrote in her intra-day update for subscribers.Despite a disagreement in industry eight- to 14-day weatherforecasts (National Weather Service calling for mild temps and aprominent private forecaster predicting cooler-than-usual mercuryreadings), Hardesty believes the record storage withdrawals are anunavoidably bullish factor going forward.

Looking ahead, Nymex local Ira Hochman agrees that the outlookis bullish in the long term but warns that a break below themarket’s key momentum support level at $5.94 could lead to furtherlosses. If the January contract is able to develop below $5.94 forat least three hours, Hochman would short January for ananticipated move down to $5.80 or possibly extending to $5.50-62.Support also exists at $6.025, which is a 61.8% Fibonacciretracement from the $5.62 to $6.68 move basis January futures, headded.

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