December natural gas futures on Tuesday made an early push to break back above the $7.00 level but found lasting resistance at the $6.97 mark. One day ahead of expiration, December settled at $6.793, up 3.1 cents.

As prompt month successor, the January natural gas futures contract settled up 8.1 cents at $7.621. Traders now await the Energy Information Administration’s natural gas storage report for the week ended Nov. 19, which will be released on Wednesday between noon and 12:10 p.m. (EST) due to the Thanksgiving holiday on Thursday.

GSC Energy’s Craig Coberly said he believes January’s futures low could come at any time. He noted that the $7.38 area looks to be a strong support area. “When the short-term trend turns higher we’ll look for gas to retrace some portion of the decline from the October high,” Coberly said. “Based on the ‘look’ of the decline, probabilities of a move above $9.50 in the next few months have been greatly reduced.”

IFR Energy Services’ Tim Evans said January natural gas managed to catch itself at $7.455 in Monday overnight trade, bending to the downside but not breaking. “Renewed weakness, though, would have January trading south toward the $6.65 low posted so far by the December futures or the $6.505 low from Oct. 13 on the spot continuation chart,” he said. “January’s own $6.30 floor from September is the next support in line, which also approximates a Fibonacci 61.8% retracement of the September-October spike on a weekly spot continuation basis.”

He noted that’s about the limit of what could be considered a normal downward correction within an uptrend, with any steeper decline pointing all the way back to the $4.52 spot low from September as the next best chance to locate a bottom.

“On the upside, we view the $7.82 [January] high for today’s session thus far as initial technical resistance, with more selling at the $7.997 downtrend shown as well as the $8.04 high from Monday’s trade,” he said.

Looking towards the storage report, predictions for the week have been ranging all over the map from a big withdrawal to a sizeable injection. The number will be compared with last year’s 1 Bcf withdrawal and a five-year average pull for the week of 37 Bcf.

Prior to its storage derivatives auction, ICAP’s estimate for the report is pegged at a 10 Bcf withdrawal. Following the options auction Tuesday, the implied market forecast was a 15 Bcf withdrawal.

Stephen Smith of Stephen Smith Energy Associates said he is looking for a 14 Bcf draw, which compares with a seasonal draw of 52 Bcf (based on 1994-2003 norms), while Citigroup’s Kyle Cooper is calling for a draw between 8 and 18 Bcf. “This is quite a bit higher than our initial estimation after all our normal data was accumulated,” Cooper said. “However, it is still relatively small and thus beginning December inventories are still likely to be at record levels.”

Advest Inc.’s Jay Levine said that while industry expectations are for either side of a 20 Bcf withdrawal, he estimates it will be a bit higher at 25 Bcf.

However, Evans is going against the grain and predicted that the report would go in the opposite direction. He is calling for an injection to be revealed Wednesday afternoon. “While we’re going to stick with our 5-15 Bcf injection estimate for Wednesday’s DOE storage report, heating degree day accumulations for last week were even less than forecast, suggesting the build could be even larger.”

Evans said we might also see an injection because of the price structure in the marketplace, “with cash quotes consistently running well south of the futures, making it tempting to add gas back to storage and hedge it out against January or February at a very attractive spread.” He said cold temperatures in mid-winter often spike cash to a premium over the board, so there’s really a vast potential for such a play. “Similar logic yields an advantage for buying cash to cover current consumption rather than draw from storage.”

He noted that there may be cooler temperatures ahead, but with the relatively warm readings lingering in the Northeast into the Thanksgiving holiday, demand is likely to be light. He added that “the natural gas market will have to ride out some further bearish storage reports before it can have a better chance of getting its feet back under it.”

He said the contrast with the 37 Bcf five-year average withdrawal will be dramatic in any case. “We also note that if the temperatures do manage to turn colder than normal in early December, year-on-year comparisons with last year’s early cold snap may still prove bearish.”

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