Natural gas futures traders continued to probe the downside on Wednesday but had significantly reined in the bearish enthusiasm that was prevalent on Tuesday. January futures reached a low of $4.193 before closing the regular session at $4.222, down 3.3 cents from Tuesday's regular session close.

Market watchers were quick to point out that the decline rate might have been put into check by the change in forecasts on Wednesday, which are now calling for a return to colder-than-normal temperatures for much of the East following a temporary warm-up.

"The natural gas market remains at the lower levels reached on Tuesday, with only a minor swing back in the direction of cooler temperature forecasts to insert some support back under these forward values," said Tim Evans, an analyst with Citi Futures Perspective in New York. "With temperatures to moderate in the next few days, the cash market will be under some selling pressure, although since futures failed to respond much to the cash market strength, we wouldn't look for much futures weakness on that account."

Evans said that while he expects a significant storage pull in Thursday's Energy Information Administration report for the week ending Dec. 10, he doesn't expect it to come close to last year's withdrawal for the week.

"Trade may simply become quiet now, ahead of Thursday's storage report, expected to show a 150 Bcf net withdrawal," he said. "This would be similar to the 153 Bcf five-year average but a step down from the 187 Bcf date-adjusted drop from a year ago."

Some market experts are expecting an even larger withdrawal when the report is revealed Thursday at 10:30 a.m. EST. A Reuters survey of 26 industry players produced a 141 Bcf to 192 Bcf withdrawal range with an average pull expectation of 163 Bcf.

Bentek Energy is projecting a 158 Bcf withdrawal, which would bring the inventory level to 3,567 Bcf. The research firm said it expects to see a 109 Bcf draw in the East Region with the Producing and West regions removing 37 Bcf and 12 Bcf, respectively.

"A 158 Bcf withdrawal would bring storage inventories down to 3,567 Bcf, 327 Bcf above the five-year average but 29 Bcf below the five-year high set last year for the third time since the withdrawal season started," Bentek said. "The East Region draw accounts for 69% of the total U.S. activity during last week and the first three-digit withdrawal of the region comes in three weeks earlier than last year."

Forecasters are still calling for some weakening of the brutal cold and snow that has been pounding the East and Midwest. "The models appear to be converging on an idea for a brief warm-up across the Midwest and East right around the Christmas holiday," said Matt Rogers, president of Commodity Weather Group, a Bethesda, MD-based forecasting firm. "The key period of potential moderation toward seasonal to above-normal temperatures is Dec. 24-28, with the 24th being in the western Midwest mainly and the 28th being an exit from New England. The warming could be tempered by its brief timing and arrival over snow cover in the Midwest. Otherwise, the latest guidance is showing signs for another possible cold push by late 11-15 day [forecast]. This one could scrape Calgary, dive into the Plains and then advance south and east like its predecessors."

AccuWeather.com predicts that the high in Chicago on Christmas Day will be 28, five degrees below normal, and the high in Philadelphia will be 42, its normal high this time of year.

Market technicians suggest that prices could work considerably lower and the fledgling bull move would still be intact. "So far, the move down from $4.637 counts like an ABC [correction]. And so far our A-equals-C target at $4.254 has managed to provide support," observed Brian LaRose, an analyst with United-ICAP.

So far so good, if you are a bull, but the bigger question is whether $4.25 support can "now repel the price action higher. Reverse from here and $4.489-4.554 will be the first challenge for the bulls. Fail to carve out an immediate bottom and a test of the $4.073-4.021 zone would be expected," LaRose said.

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