If at first you don't succeed, try, try again; that might as well have been the motto of natural gas futures bulls as their third consecutive attempt for a January settle north of resistance at $4.500 proved successful on Wednesday. The prompt-month contract recorded a high of $4.614 before closing the day's regular session at $4.606, up 21.3 cents from Tuesday's finish.

After reaching consecutive highs of $4.540 and $4.545 on Monday and Tuesday but failing both times to close above $4.500, the third time proved to be the charm. While some had been targeting the $4.500 level as an important hurdle, others did not see as much significance in the price point.

"I hadn't put a whole lot of weight on $4.500 except for the fact that it is halfway between $4 and $5," said a Washington, DC-based broker. "We still have to see whether futures can get into a real bona fide bullish trend. Yes, we have some weather, and on Wednesday forecasters made the long-range forecast even colder on the back end. Right now, the six- to 10-day might have a blip of a warm-up for the East, but the 11- to 15-day is now even colder at the end. I think this was justification for the price action we saw Wednesday. We rallied, but I don't think it is a decisive move into a new mega-bull market."

Looking ahead, the broker said the next target to the upside is $4.800, followed by the $5.007 high from Aug. 2 for September 2010 futures. "We have gotten through the old $3.800 to $4.500 range, but let's see if north of $4.500 holds on Thursday," he told NGI. "This market has had a habit of spiking up and giving it back rather quickly."

Turning attention to Thursday morning's storage report for the week ending Dec. 3, it appears that the industry is expecting the Energy Information Administration (EIA) to report the first hefty withdrawal of the season. Citi Futures Perspective analyst Tim Evans estimates that 108 Bcf will have been removed from underground storage, while Bentek Energy is on the record for a 78 Bcf draw, which would put storage levels at 3,736 Bcf.

Noting that it is likely the first time this winter that all three regions are in withdrawal mode, the research firm said it expects a 45 Bcf withdrawal in the East Region, a 23 Bcf withdrawal in the West Region and a 10 Bcf withdrawal in the Producing Region.

"A 78 Bcf withdrawal would bring storage inventories down to 3,736 Bcf, 343 Bcf above the five-year average but 46 Bcf below the five-year high set last year," Bentek said in its weekly storage outlook. "The first withdrawal of the season is estimated in the Producing Region during the week ended Dec. 3 due to colder-than-normal temperatures."

The number revealed Thursday morning at 10:30 a.m. EST will also be compared to last year's date-adjusted 55 Bcf draw for the week and the five-year average draw of 74 Bcf.

Weather forecasts seem to be a tale of two weather patterns. WSI Corp. of Andover, MA, in its six- to 10-day outlook shows below- to much-below-normal temperatures east of the Mississippi River, but to the west above- to much-above temperatures are expected. "Below- and much-below-normal temperatures are forecast over the eastern half of the country. Anomalies as cold as eight-16 degrees below normal are anticipated in the coldest locations," the forecaster said in a morning report. However, "Above- and much-above-normal readings are expected to encompass most of the western half of the country.

"Temperatures may trend even colder over most of the eastern two-thirds of the country than currently forecast. Medium-range models all advertise unseasonably cold weather will redevelop over of the central and eastern U.S. next week."

Top analysts see the impact of weather as threefold. According to Peter Beutel, president of Cameron Hanover, "[C]old weather ends up being important as a forecast, which gets traders excited enough to cover shorts; as an arrival, which forces traders to cover any remaining shorts and even gets them to get long; and then as a memory, which influences the next week's EIA report. If we string enough good reports together, it will give us longer-term buying in this market. Right now, we expect buying, but it does not seem to have concentrated itself yet."

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