December natural gas futures scored big gains Wednesday as traders expected continued cold weather and holders of short positions were forced to minimize losses. December futures rose 22.7 cents to $6.743 and January added 21.1 cents to $6.813. December crude oil fell 77 cents to $53.62.

“You’ve got cold weather in the Northeast, cold weather throughout the country, there were shorts in the front month and the market looks like it wants to test up to $7,” said a New York trader. He added that with options expiration on Friday, “I wouldn’t be surprised if they pinned it at $7. Overall the market could test up to $7, perhaps it’s a little short-lived, but then the market is down to $6.50 to $6.25.

“I don’t know what it’s going to take to get a sustained rally out of this market, maybe some deep, deep cold for a sustained period of time, but I don’t know if that is going to happen. It feels like a temporary short squeeze,” he said.

December futures are slated to expire on Monday [Nov. 24], somewhat earlier than traders normally experience. “I thought expiration would be on Tuesday [Nov. 25], because we are open on Friday [Nov. 28]. Friday is a half day so maybe they aren’t counting it because it’s the day after Thanksgiving.” Futures typically expire the third business day before the end of the month, which if Friday were counted would place expiration on Tuesday. “Expirations aren’t what they used to be,” he chuckled.

Traders will be taking a close look at tomorrow’s storage report for the week ended Nov. 14 to ascertain if recent eastern cold had a material impact on supplies, and if further cold episodes are likely to diminish supplies more than expected.

A Bloomberg survey of 8 analysts revealed a median withdrawal of 6 Bcf and a similar Reuters poll revealed a median build of 2 Bcf from a sample of 23 analysts. The Reuters poll had a range of a build of 11 Bcf to a withdrawal of 15 Bcf. Kyle Cooper of IAF Advisors in Houston is looking for a build of 5 Bcf.

Economy watchers didn’t glean much from the Energy information Administration (EIA) release of petroleum inventory figures. Crude stocks increased 1.599 million bbl, a little higher than the 1 million bbl expected in a Bloomberg survey and unleaded gasoline supplies rose by 539,000 bbl, more than the flat inventory traders expected. Distillates fell by 1.471 million bbl but expectations were for a gain of 600,000 bbl. Refinery utilization did increase to 84.9% slightly higher than the 84.5% anticipated.

Technical traders had a hunch prices might be headed higher. “Tuesday stalled and retreated from our bearish case resistance at $6.680 ($6.704 actual high ) but the bears needed a decisive decline on Wednesday to confirm Tuesday as a doji [candlestick] top,” said Walter Zimmerman of United Energy. He added that if this did not happen, then Tuesday’s price action was a less convincing “spinning top” and “Natgas is likely going higher,” he said in a morning note to clients. According to Zimmerman, that means at least $6.900.

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