The December natural gas futures contract was fast out of the chute on its first day as prompt month Wednesday, gapping higher at the opening bell and quickly etching a new high for the week at $4.44. However, scale-up commercial selling was seen throughout the surge and was effective at limiting the market’s upside. December shuffled quietly lower in the afternoon, closing with a 12.8-cent gain for the session at $4.389. Trading was relatively light, with only 69,400 contracts changing hands.

The futures rally yesterday coincided with the arrival of the coldest air yet this season across much of the Midwest and Northeast U.S. A little moderation is expected today as temperatures will rise into the low 50s (Fahrenheit), but that warm-up is expected to be short-lived as weekend highs are forecast to only reach the 30s and 40s. Cash prices reacted accordingly Wednesday, led by Northeast markets which experienced double-digit gains for the second day in a row.

However, looking out on the horizon, some relief may be in store. According to the latest eight- to 14-day outlook released by the National Weather Service, above normal temperatures will invade the western half of the country during the second week in November. Below normal temperatures are still predicted for eastern markets, but that represents a far smaller area than the swath of the country currently experiencing unseasonably cool weather.

More upside is possible today, but most traders believe this remains a “sell the rallies” market. Resistance is seen at today’s high of $4.44, which correlates with the recent top in November futures of $4.42. A break higher would likely prompt a retest of previous December peaks of $4.53 and $4.61. On the downside, a target exists at the $4.325-330 chart-gap created by Wednesday’s open. More potential buying is seen at Friday’s $4.15 low.

And while technical factors will come into play at some point on Thursday, they will likely play second fiddle to some good old fashioned fundamental data set to be released at 10:30 a.m. EDT. Expectations for Thursday morning’s storage report run the gambit from a 5 Bcf withdrawal to a 30 Bcf injection, with most predictions centered on a 10-20 Bcf injection. Last year at this time the market injected 32 Bcf and last week the market was relegated lower when a larger-than-expected 33 Bcf was reported for the week ending Oct. 18.

Nymex yesterday announced that starting Nov. 1, it would offer calendar spread options contracts for natural gas that are based on the differential of contracts that are six and 12 months apart. Since June of this year, Nymex has offered calendar spread options, but only for spreads between any combination of the first four months of the strip and for any pair of two consecutive months in the first 13 listed contracts.

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