December natural gas futures closed at $7.624 on Wednesday, dropping another 23.9 cents to bring the contract’s four-day decline to $1.013. The contract settled near the low end of its $7.570 to $7.855 range for the day, which could lead to further weakness on Thursday.

While putting in a new all-time high trade on Wednesday, December crude took a break from recording another record settle. The contract continued to inch closer to the $100/bbl mark with a high of $98.10/bbl before retreating to close out the day at $96.37/bbl, down 33 cents from Tuesday. Despite the drop, the directions of the crude and natural gas futures markets couldn’t be any more different.

“Natural gas markets remain the odd, bearish energy market, but with record storage, a benign temperature environment as far as heating demand is concerned, and hurricane season coming to a close, it seems to be accurately reflecting its own fundamentals,” said Tim Evans, an analyst with Citigroup in New York. “Buying natural gas because it is cheap compared to heating oil remains the losing trade that it has been over the past 18 months.”

Traders continue to try to get their arms around the upcoming winter heating season and whether it can make a dent in an amply supplied market. Once the early blast from Canada finishes pummeling eastern and Midwest energy markets, the outlook is at best normal for the bullish camp.

“The coldest air of the season will sit across the Midwest for another day or two and will also move into the Northeast U.S. for the rest of this week. The air will not be brutally cold but will be cold enough to bring about meaningful demand for heating energy for this time of the year in the major metro areas of the Northeast U.S. and Midwest,” said meteorologist John Dee.

The bullish case won’t be able to get much traction from the mid-term weather picture either. Frontier Weather’s six- to 10-day forecast for Nov. 12-16 calls for above-normal temperatures from California and the Southwest to the Plains and Great Lakes, as well as across most of Canada. Normal readings are expected in the Pacific Northwest and along the East Coast. Further out in the forecaster’s Nov. 17-21 outlook, temperatures are expected to be normal along the East and West Coasts, with above-normal readings elsewhere.

In addition to quiet temperature news, the tropics remain calm, lending more credibility to those who believe the 2007 Atlantic hurricane season is already over.

Analysts do not see why there should be any impact on natural gas prices from soaring oil prices. “There is exactly zero fundamental reason for natural gas to trade higher simply because crude is higher,” said a New York analyst. He added that on a Btu basis natural gas has been below crude oil for months, and “anyone with fuel-switching capabilities made the change a long time ago.

“Natural gas has been trading below crude oil on a Btu basis since 2005, when it was inflated by Hurricane Katrina. The fundamentals indicate [natural gas] prices should be much lower,” he said.

Turning attention to natural gas inventories, traders are having to weigh record storage against the possibility that the nation’s voracious demand for gas could make quick work of supply in the event of a cold snap down the road. With 3,509 Bcf in storage, the market is in uncharted territory. After breaking the all-time record level of 3,461 Bcf with a 66 Bcf injection for the week ended Oct. 26, traders are expected to have to digest yet another build to inventories when data for the week ended Nov. 2 is released by the Energy Information Administration on Thursday morning.

According to a Reuters survey of 25 industry players, the average of expectations is for a rise in stocks of 32 Bcf. Golden, CO-based Bentek Energy said its flow model indicates a 39 Bcf build, which would bring stocks 3% above the five-year high (last year) and 9% above the five-year average. Bentek expects a 17 Bcf injection in the East region, an 18 Bcf build in the Producing region and a 4 Bcf addition in the West region.

According to the analysis and research firm, with storage levels as full as they currently are, gas is going to start to have trouble finding a home. “Storage fill nationwide in the Bentek sample increased 1.9%, from 95.7% to 97.6%, this week,” Bentek said in its weekly Natural Gas Storage Outlook. “The largest percentage increase was at Petal, up 18% from 77.4% to 95.4%.”

Thursday morning’s storage report will be compared to a 7 Bcf withdrawal last year and a 17 Bcf five-year average build.

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