Natural gas futures vaulted to new 21-month highs Thursday morning on the news that 136 Bcf was pulled from storage facilities during the week ending Jan. 10. Buying was seen from all market segments and was intensified by the existence of buy-stops that were triggered on the way up. The February contract finished at $5.645, up 21.5 cents for the session and nearly 60 cents above its $5.06 low notched Tuesday. Volume in the gas pit was heavy as an estimated 124,108 contracts changed hands.

Working gas in storage was down 136 Bcf to 2,195 Bcf as of Jan. 10, according to the Energy Information Administration. Although the 136 Bcf withdrawal fell short of last year’s 142 Bcf figure, it exceeded most market estimates, which were in the 100-120 Bcf range. Stocks are now 453 Bcf less than last year at this time and 18 Bcf below the five-year average of 2,213 Bcf.

Thursday’s 21.5-cent gain comes on the heels of a 32.3-cent rally Wednesday spurred by the arrival of the coldest weather in several years for most of the eastern United States. Looking ahead, private (see related story) and governmental meteorologists call for more of the same through the end of the month.

While some market watchers expect the market to rally to $6.00 in the near future, others remain in a sell-the-rallies mode. “I’d expect to see some profit taking up here,” said George Leide of Rafferty Technical Research in New York. “Sure, the number was bullish. We calculated the average of market estimates to be a 107 Bcf draw. But each time we have rallied, selling has beat the market right back down.” That being said, Leide sees the market’s next upside objective at $5.71. He looks to be a seller against that level of resistance.

Natural gas futures also received a bullish boost from crude oil futures, which traded to a new 25-month high Thursday morning on continued fears over what a war with Iraq would do to the Middle East oil supply. February crude finished 45 cents stronger at $33.66/bbl.

Another possible explanation for the price strength is that the market is already factoring in what may turn out to be an even more bullish storage report next Thursday. Citing the extremely cold weather across the eastern two-thirds of the country this week, Thomas Driscoll of Lehman Brothers looks for a withdrawal of roughly 200 Bcf. If realized, a figure of that magnitude would easily surpass the 126 Bcf draw from a year ago as well as the five-year average takeaway of 152 Bcf.

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