Shrugging off losses notched in the overnight Access trading session, natural gas futures checked higher throughout the day Thursday as traders reacted to forecasts calling for a changing weather pattern in the second half of November. At the closing bell, the December contract was 9 cents higher at $2.96.

Most traders polled by NGI yesterday were surprised by the market’s ability to rally. While longer-term outlooks call for a change in the jet stream to bring below normal temperatures by month’s end, the current weather is not very price supportive. Add to that the fact that very little if any gas can be injected into storage facilities that are already 94% full, and you have a physical supply glut, traders agreed. Cash prices drove this point home again Thursday, as Henry Hub delivered cash prices fell for the eighth-straight trading session.

However as is often the case, the futures market beat to a different drum. Retracing losses etched Wednesday evening, the December contract rallied to $2.95 in early morning Access trading Thursday morning. Then after opening nearly unchanged from Wednesday’s close, the market pressed steadily higher throughout the regular open-outcry session.

Traders also noted gains in the nearby crude oil pit buoyed gas futures yesterday. December crude finished $1.08 stronger at $21.17, its highest level in more than a week.

Looking ahead, traders agree that prices are likely to see at least a dime up-tick when the forecasts show the much ballyhooed weather pattern shift. However, many feel that will represent an excellent selling opportunity as storage levels point solidly to lower prices. At 3,100 Bcf, storage currently stands at near record-full levels. However that may be just the tip of the bad-news iceberg for bulls. For New York-based IFR Pegasus, the real test will come when this year’s withdrawals fail to stack up against the record draw-downs from a year ago. “If this year’s withdrawals match their historical average, by the end of November the year-on-year storage surplus will jump from the current 352 Bcf level up to 504 Bcf. The impact on prices will not be subtle,” the group wrote in its daily Pegasus Energy Report.

To take advantage of this potential price down draft, the group has suggested its customers short the December contract and protect that position with a $3.12 buy stop. As prices sift lower, the group looks to lock in a profit by walking the buy stop lower.

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