Despite calls for profit-taking, natural gas futures continued higher Wednesday as buyers pressed prices to new 19-month highs. For a second session in a row, the buying was reportedly dominated by fund traders who, after being flat for more than a month began to accumulate long positions. The buying was heaviest in the January and February contracts, which gained 7.3 cents and 8.1 cents to close at $4.709 and $4.675, respectively. March lagged slightly with a 5.5-cent gain to $4.539. Meanwhile the interest in the back months was considerably less, leaving the summer 2003 strip with a paltry 1.3-cent gain to average $4.235.

While many traders feel that the market will complete a buy-the-rumor-sell-the-event price move today when the Energy Information Administration releases its weekly storage data, some are not convinced the market has seen its top for the week. Although not directly saying that he looks for higher prices Thursday, Nymex local Eric Bolling (RBI) senses there might be something more to this market than what is already known. “Trade thinks that there is plenty of gas out there and prices will trend lower. The funds, meanwhile, are happy with the recent gains and continue to buy this thing. There were times [Wednesday] when it looked as though prices would correct lower or consolidate, but the sellers appear to be running out of bullets.”

Looking ahead, Bolling will be on the sidelines Thursday morning prior to the release of fresh storage data from the EIA. “Everyone pulls their limit orders just before the number is released. Only after the number has had a chance to sink in do people re-enter the market,” he said. Baring a bearish shock Thursday, Bolling will look to be a buyer on any and every dip. “I made the mistake of actually selling on a dip [Wednesday] thinking that the market had run its course and was heading lower. Until something fundamentally changes in this market, you have to continue to buy dips,” he said.

As for the storage report, expectations call for a withdrawal in the 120-158 range, versus 91 Bcf last week and a 16 Bcf withdrawal a year ago. At 2,956 Bcf, storage now stands 298 Bcf below year-ago levels and 25 Bcf above the five-year average. Because Thursday morning’s report likely will feature a triple-digit number, storage could fall 400 Bcf below year-ago levels and 50 Bcf below the five-year average. Going forward, the comparisons versus last year get only marginally better with subsequent weekly draws last year of 43 Bcf and 80 Bcf.

However, for Kyle Cooper of Salomon Smith Barney, it will take more than a number within the range of expectations to goose the market higher. “We would note that from these price levels, reaction to news is much different than from $4.25. We do believe that more bullish news will be required to further propel the market,” said Cooper whose estimate calls for a 148-158 Bcf withdrawal.

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