Even though January natural gas futures knee-jerked higher above the psychological $9 level following the 32 Bcf storage withdrawal report Thursday morning, the contract ultimately put in a low of $8.700 before closing at $8.844, down 2.7 cents on the day.

After trading as low as $8.790 in pre-report trading, the prompt month was trading at $8.900 in the minutes before the storage number went public. Immediately following the 10:30 a.m. EST report from the Energy Information Administration (EIA), the January contract sprang above the $9 level to put in a high of $9.050 before slumping lower.

“The storage withdrawal was bigger than expected as evidenced by the futures rally we saw immediately following the report,” said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami. “The surprise was the size of the withdrawal from the East region. The 28 Bcf withdrawal from that region was bigger than expected.” The Producing region posted a 5 Bcf withdrawal for the week, while the West region injected 1 Bcf.

Looking at the market’s current swings, Kennedy said trading is dangerous right now. “The futures market is treacherous as hell right now. It certainly is not for widows and orphans. If we sell off here it looks like we are going to find pretty good support. From the look of things, we appear to be breaking out to the upside. However, I am a bull that is worried about being turned into a steer if I buy too high. Let’s face, it, we are not giving the gas away at $9. That is not cheap. The problem is there is no resistance in this area. In fact, the next level of mention is $9.80.”

The broker noted that the weather picture going forward will make all the difference in the direction of futures prices. “It is supposed to be cold for the next 10 days, followed by a three-to-four-day warm-up,” he said. “However, following that we have to watch out because some really cold air is expected to come down from Canada.”

Traders noted that the expiration of the December futures Tuesday was revealing, and may portend further market strength. Henry Hub cash on Tuesday for Wednesday delivery averaged $7.61, a whopping 70.8 cents below the expiration of December futures at $8.318. “Traders had a perfect opportunity to crush the December contract at the close if they thought the cash market was too low or natural gas wasn’t in demand, and they didn’t. That tells me something,” said a California trader.

“The theory that seems to be developing is that a normal winter is not bearish anymore. Normal might just be bullish, and a below normal winter might just be extremely bullish,” he suggested.

Cold weather continues its eastward march. The high in Chicago Thursday of 36 degrees is expected to drop to 22 by Monday, the Weather Channel predicted. The normal high at this time of year in the Windy City is 43. Philadelphia’s balmy Thursday high of 67 is expected to fall to 42 by Monday. The norm for the City of Brotherly Love is 49, the forecasting firm said.

The 32 Bcf withdrawal from storage for the week ended Nov. 24 did come out on the high side of industry expectations. Citigroup analyst Tim Evans said he was looking for a withdrawal of about 30 Bcf. “This one is a little tough to gauge because of the Thanksgiving holiday,” he said. “Some holidays have an impact on demand and some don’t.”

A Reuters survey of 22 industry players predicted a 24 Bcf withdrawal, although the range of withdrawal estimates ran from 5 Bcf to 43 Bcf. The ICAP storage options auction on Wednesday resulted in an expected weekly storage withdrawal of 23.75 Bcf.

According to the EIA, 43 Bcf was withdrawn last year during the same week and the five-year average pull for the week is 22 Bcf.

According to Golden, CO-based Bentek Energy’s Flow Model calculation, the company projected a net storage withdrawal of 20 Bcf for the week. Using its new Natural Gas Supply/Demand Balance calculation, Bentek was looking for a 13 Bcf withdrawal.

As of Nov. 24, working gas in storage stood at 3,417 Bcf, according to EIA estimates. Stocks are still 185 Bcf higher than last year at this time and 230 Bcf above the five-year average of 3,187 Bcf.

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