Picking up where the action ended on Wednesday, December natural gas futures on Thursday continued to scout lower price levels. After breaking below $4 and recording a $3.917 low, the prompt-month contract went on to close the regular session at $3.927, down 11.9 cents from Wednesday.

Combined with Wednesday's decline, futures have dropped 28.3 cents -- taking a good chunk out of the four-day rally through Tuesday of 37.4 cents. Some traders saw the ups and downs of the last week as the market balancing news of expected cold weather against the new all-time record storage level.

"A lot of this move upwards was likely people seeing the cold weather moving into the Midcontinent and a lot of the country," said Steve Blair, a broker with Rafferty Technical Research in New York. "That may very well have spurred some short-covering by some of the managed money funds, which have been very short recently. However, the market may have given us a pretty good fakeout. We got above $4.140, which was kind of a key technical level. However, the rally failed miserably Wednesday and now we're back below $4. I think we're back where we belong."

Blair said he thinks the market is pretty content in the $3.500 to $4.500 range and doesn't see much of a reason for a breakout. "I think we've probably got a bottom already put into this market, unless for some reason we skip the winter heating season this year. As for the upside, the bulls have a couple of numbers firmly in their sights. If we get above $4.380 or $4.500, I think the market could make a beeline higher. These are the key pivot points that we'll be monitoring closely over the next few weeks."

Wednesday's price plummet in light of the modest 19 Bcf inventory build was seen by some as a correction between cash and futures with the two becoming better matched. Spot December futures fell 16.4 cents to $4.046 on Wednesday, but according to NGI's Daily Gas Price Index, Henry Hub gas for Thursday delivery rose 24 cents to $4.

"This is a return to reality," said a New York floor trader. In his view the market had been something of an aberration because of the large differential between futures and the cash; "$4.20 and $4.25 were big [technical] resistance numbers and a lot of traders were showing that as their sell point; $3.85 was resistance on the way up, but now it is a pretty solid support number."

Technical analysts see some major hurdles ahead for the bullish contingent. "If this pullback is merely correcting the move up from $3.743, natgas will not be able to get back below $3.936-3.851 (0.618 and 0.7862 retracements)," said Brian LaRose, analyst with United-ICAP. He suggested that if the market were able to "turn higher from this area, the $4.346-4.438 will be the next challenge for the bulls. Sink decisively below this support zone instead and we would expect a test of the $3.608-3.434 area before any possibility of a sustainable recovery."

Turning higher may have gotten a little easier with a near-term forecast that calls for cooler-than-normal temperatures across a broad section of the country. WSI Corp. of Andover, MA in its six- to 10-day forecast calls for below-normal temperatures north of a broad arc stretching from western Pennsylvania to central Louisiana and out to southern Oregon.

"Temperatures from portions of the West Coast through most of the central U.S. are expected to average 2 to 8 degrees below normal during the six-10 day period," the forecaster said. It also offered the caveat that "temperatures may continue trending colder in future outlooks from the Midwest through the Northeast while warmer across the Southwest into Texas. Most models [Thursday] have trended stronger today with a high latitude ridge west of Alaska but are also allowing more undercutting of the block by the sub-tropical jet."

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