Weekly physical gas prices for the five trading days ending Dec. 20 were awash in a sea of red ink. NGI's National Weekly Spot Gas Average came in at $4.48, down a stout 66 cents with all regions losing anywhere from a nickel to more than $2.

Prices are just a whisker off highs not seen since the summer of 2011. The NGI Henry Hub weekly average price came in at $4.26, just 4 cents off last week's $4.30 and the second highest Henry Hub weekly price seen since August 1, 2011.

Of actively traded points the week's biggest losers were Algonquin Citygates giving up $9.48 to average $14.16 and Tennessee Zone 6 200 L dropping $9.61 to average $13.85, which was to be expected as demand normalized following the previous week's surge of Arctic air and winter storms.

Of the three points in the win column -- all in the Midwest region, Dawn rose the most adding 7 cents to $4.66.

Regionally the Northeast fell the hardest losing $2.16 to average $4.86 and the Rockies retreated 78 cents to $4.28. California was not far behind dropping 68 cents to $4.50.

The Midcontinent lost 30 cents to $4.33 and Midwest locations shed 9 cents to $4.55.

East Texas fell 6 cents to $4.22 and South Texas and South Louisiana both gave up a nickel to $4.17 and $4.22, respectively.

Over in the natural gas futures arena, January futures rose 6.7 cents to $4.418 for the five trading days.

Thursday's storage report had traders back on their heels as the Energy Information Administration reported the largest withdrawal ever. A humongous 285 Bcf was pulled for the week ended Dec. 13, well ahead of the 260 Bcf expected by traders and 11 Bcf greater than the previous record of 274 Bcf withdrawn January 25, 2011.

The report stunned many, and the record 285 Bcf pull lost no time in launching prices. "This is huge," said a New York floor trader in the minutes after the fresh data was released. "Volume is 74,000, which is high for this early in the session, and the March-April spread is 19.8 cents bid at 20. It's up 5 cents and moves around like no other spread; $4.40 will be an initial resistance level and above that $4.50, but I think we are looking at $4.25 on the downside. We made a high of $4.402 and the market seemed to back off that. If we can get through that, $4.50 would be the next objective," he said.

The January contract settled Thursday at $4.460, up 20.9 cents and February managed a gain of 21.5 cents to $4.489.

Citi Futures Perspective analyst Tim Evans called the report "bullish," adding that the withdrawal more than doubled the 133 Bcf five-year average pull for the week. "The decline likely reflected higher heating demand than most models projected as consumption became non-linear with population-weighted degree days," he said. "Combined with today's forecast for colder temperatures, the storage report should reopen the upside for prices."

Traders had been expecting a large pull, but the actual figure was greater than anyone had calculated. Last year a minuscule 70 Bcf was withdrawn, but a Reuters poll of 25 traders and analysts revealed an average draw of 258 Bcf, with the sample ranging from 220 Bcf to 284 Bcf.

Bentek Energy calculated a titanic 272 Bcf draw using its flow model and said demand increased more than 30 Bcf/d from the previous week, spread among all three regions. It observed that this week's forecast is the second largest on record. "There is increased risk to the forecast this week as the unprecedented cold weather blanketing the majority of the country during the storage week makes this week difficult to compare with previous history." United ICAP was expecting a pull of 265 Bcf and Ritterbusch and Associates calculated a 260 Bcf withdrawal.

Inventories now stand at 3,248 Bcf, 488 Bcf less than last year and 261 Bcf below the five-year average. In the East Region 132 Bcf was withdrawn, and in the West Region 54 Bcf was pulled. Inventories in the Producing Region decreased by 99 Bcf.

In Friday's trading physical natural gas for weekend and Monday delivery on average nationally was flat, hiding the fact that there were major weather-driven declines along the Eastern Seaboard and healthy gains at points positioned to move gas to the Midwest.

Some Northeast points dropped more than $2, and double-digit drops were common in the Mid-Atlantic. Rockies and Midwest pipelines, however, enjoyed strong gains as Chicago Citygate prices advanced. At the close of futures trading the January contract had notched a high at $4.492, a level not seen since the summer of 2011, before settling at $4.418, down 4.2 cents on the day. February natural gas fell 2.2 cents to $4.467.

Futures traders are optimistic. "The $4.50 level was kind of a marquee price. It's time for the bulls to blow through it or shut up. I'm thinking in the realm of things we will trade through it," said a New York floor trader.

Analysts see a continuing increase in storage deficits working to drive the market higher. "With below-normal temperature views now stretching into the New Year, the dynamic of deficit expansion remains well entrenched as a bullish price driver that will likely maintain a $4 handle in nearby gas pricing through the first quarter of next year," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients.

"With some of the temperature views showing cold patterns stretching well into some southern regions, additional production freeze-offs may also need to be discounted. While we had expected a sizable upswing in imports to provide some offset to last week's bullish weather factor, this development appeared minimal within [Thursday's] stats. Meanwhile, we still view the open interest configuration as significantly out of synch with increasingly bullish fundamentals as will likely be indicated in COT [commitment of traders] guidance to be released later [Friday]."

In Friday's trading weekend and Monday temperatures as much as 15 to 20 degrees above normal knocked the socks off weekend and Monday demand. AccuWeather.com reported that Friday's high of 51 in New York City was expected to rise to 56 on Saturday and reach 60 by Monday. The normal high in the Big Apple this time of year is 42. Philadelphia's 55 on Friday was predicted to reach 62 on Saturday but ease to 59 on Monday, still 15 degrees above normal. In Washington, DC, the high Friday of 61 was anticipated to reach 64 Saturday and ease to 61 Monday. The typical mid-December high is 45.

Forecasters are calling for a wide swath of above-normal temperatures. "A southwesterly flow aloft from Texas to New England through the weekend assures unseasonably warm weather for most of the I-95 corridor," said Elliot Abrams, AccuWeather.com meteorologist. "There is a cold front from eastern Canada that will slide slowly south and stall in central New England. The front could jump back north on Sunday, but there is much uncertainty about temperatures." He added that weather models show a huge temperature difference in a short distance across northern and central New England.

Weekend and Monday deliveries at Transco-Leidy fell $1.12 to $2.20, and gas on Dominion shed 29 cents to $3.16. Gas on Tetco M-3 Delivered dropped 37 cents to $3.58, and gas headed for New York City on Transco Zone 6 skidded 54 cents to $3.51.

In Friday's trading the day's low price was registered by Tennessee Zone 4 Marcellus at $1.20, and according to a Houston-based marketer, the low price was not unexpected, "especially when gas gets turned back. It's going to be 60 degrees in New York. Demand has softened a lot for the weekend so prices moved quite a bit."

He noted that Tennessee Zone 4 Marcellus "is in a constrained area, and the existing infrastructure is there for the time being. Sometimes if shippers can't park gas on Stagecoach, it even gets worse."

The high price in the day's trading range was seen on Algonquin Citygates at $7, but quotes across New England slid on moderating temperatures as well.

Weekend and Monday gas at Algonquin tumbled $2.24 to average $5.85, and deliveries to Iroquois Waddington were flat at $4.89. Gas on Tennessee Zone 6 200 L dropped $2.74 to $5.66.

Those moving gas out of the Rockies and the Midwest into the Chicago Citygates enjoyed price gains. Gas for delivery to Chicago for the weekend and Monday rose a stout 23 cents to $4.76.

Gas on CIG rose by 12 cents to $4.34, and at the Cheyenne Hub weekend and Monday gas gained 9 cents to $4.38. Gas on Alliance rose 23 cents to $4.75, and packages at Northern Natural Ventura gained 24 cents to $4.73.

Market bulls following the fundamentals are predicating their trading on more cold air sliding south from Canada within the next two weeks. WSI Corp. in its Friday morning 11- to 15-day outlook shows a broad pattern of above-normal temperatures extending west of an arc extending from southern New England to Indiana to Louisiana and east of the Great Basin.

"[Friday's] forecast is a bit cooler in the central U.S., [and] forecast confidence remains slightly above average into the 11-15 day period with good model agreement and low ensemble member spread. Again, the morning's forecast is a bit colder than most ensemble guidance, but the key hemispheric signals remain in place for at least one more arctic shot to drop down from Canada during the first week of January."

Arctic shots or not, at least one pipeline is expected to be maxed out for the remainder of the winter. According to industry consultant Genscape on Friday, "Algonquin City Gate continue[s] to be the biggest mover in North American gas markets. The weekly price average increased by $18.4/MMBtu this week. Prices spike whenever cold weather induces greater demand imports are maximized. With no new infrastructure expansions, pipeline capacity constraints continue this winter. Algonquin has been flowing gas northward at capacity since late October and we project this path to be at capacity for the rest of the winter."

In Thursday's trading gas for Friday delivery was muted for much of the country, with gains or losses of a few pennies, except for in the Northeast, which saw another day of steep price drops. In the Mid-Atlantic, however, price declines were not so severe. Friday deliveries on Transco Leidy fell 14 cents to $3.32, and on Dominion gas was seen at $3.45, down 9 cents. Gas at the Tetco M-3 delivery point shed 22 cents to $3.95, and gas headed for New York City on Transco Zone 6 dropped 34 cents to $4.05.

Eastern and Northeast softness stood in sharp decline to market firmness elsewhere. In the Midcontinent, Friday packages came in a few pennies higher. Deliveries to NGPL Mid-Continent Pool rose 3 cents to $4.23, and on ANR SW gas for Friday eased a penny to $4.23. On Oklahoma Gas Transmission, next-day gas changed hands at $4.16, up 7 cents, and on Panhandle gas was quoted at $4.08, up 4 cents.