Buoyed by the coldest air thus far this season, the natural gas futures market turned higher Wednesday as weak shorts covered their positions. Cash prices, which were up nearly 75 cents at some locations, were also seen as a price supportive factor, traders agreed. The December contract received the biggest buying boost, up 17 cents at $4.897. At 59,166, estimated volume was very light considering the size of the price hike.

Colder air will invade the Northeast and Mid-Atlantic Thursday, prompting the first real heating demand for the population centers there since March. Cash prices reacted accordingly, lead by the New York area deliveries on Transco, which soared 70 cents to trade back above $5.00.

Technically, the market was also primed for a rally after its downward momentum ground to a halt Tuesday. “We saw a non-trend day [Tuesday] and that set the stage for a rebound,” offered Tom Saal of Miami-based Commercial Brokerage Corp. “There were no sellers on Wednesday. The funds are already short — probably as short as they will get. There was nobody out there willing to push it lower.”

Looking ahead, traders are mixed as to whether Wednesday’s rally was a flash in the pan or the beginning of an uptrend. “The early $4.92 high for December natural gas was a violation of the steep downtrend resistance off the October peak, raising the prospect of retesting Monday’s $5.024 high,” said Tim Evans of IFR Pegasus in New York. “Past that point, we see the market running past the failed support at $5.12 to work somewhat further into the congestion topped by the $5.325 high of October 22.”

However, those gains are predicated on the idea that storage will not offer too bearish a surprise Thursday. Expectations are centered on a 28-52 Bcf build, which would easily trump the five-year average refill of 20 Bcf. And while a number of that magnitude could fall modestly short of last week’s 55 Bcf injection, it would contrast sharply with last year’s comparable report, featuring a 27 Bcf withdrawal.

Employing its new methodology the Energy Information Administration (EIA) last Thursday revised 16 weeks of storage data going back to July 4. The net effect of that revision was to increase the estimated amount of gas in storage by 38 Bcf. Add in the 55 Bcf weekly injection also released Thursday, and storage levels were estimated at 3,121 Bcf as of Oct. 24. Natural gas futures dropped sharply on the news, leaving the new prompt month — December — at a new 10-month low of $4.64. Traders fear that another large injection would break the back of a market that has thus far only been bending lower.

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