Predictions that Tuesday’s rally confirmed natural gas futures’ near-term bottom at $8.700 appeared to be premature as Wednesday’s trading session trolled even lower. February natural gas carved out a low of $8.505 before settling at $8.694, down 47.4 cents on the day.

After riding higher Tuesday on the backs of strong gains by various petroleum futures contracts, natural gas resumed its course lower Wednesday as petroleum futures eased. Following a $2.39 jump Tuesday, February crude gave 58 cents back on Wednesday to settle at $65.73/bbl.

“Natural gas sort of fell through the $8.75 level that we have been holding at, so I think this market is still weak,” said a Washington, DC-based broker. “The momentum on the downside has slowed some, but by no means has it turned around and become a countertrend or anything like that. Fundamentally, I think this thing is still bearish.”

For a demonstration of how weak natural gas futures are, the broker suggested a comparison to recent crude futures action. “With February crude up over $2 on Tuesday, natural gas only managed a 50-cent range for the day,” including Access. “A testament to the weakness in natural gas is that a monster day in crude — which is in a bull mode anyhow — hasn’t been able to cause a decent short-covering rally in this natural gas sell-off.”

Looking at support areas, the broker said the $8.60 level offers “very flimsy” support right now. Below that, he said the $7.85-7.88 area is also a potential support zone. “At some point there will likely be a short-covering rally, maybe not by the funds, but by anybody else who has been riding this market lower,” he said. “I wouldn’t be surprised to see it, just like I wouldn’t be surprised to see one final furious bout of selling after that.”

As for the weather situation, the broker said that the cool temperatures seen over the holiday weekend are about to give way to unseasonably warm conditions once again. “We are still predicted to be back with highs in the 60s in the DC area over the next five days,” he said. “When you have temperatures in the 60s in the second and third week of January, that is devastating to the bullish case for prices. That is a big part of what we are seeing.”

On the weather topic, last week’s unseasonably warm temperatures are likely to translate into another smaller than average withdrawal in natural gas storage when the Energy Information Administration reports Jan. 13 levels at 10:30 a.m. EST Thursday morning. The industry is calling for a withdrawal anywhere from 15 to 55 Bcf

Golden, CO-based Bentek Energy projects a storage withdrawal of 46 Bcf this week, resulting in 2,575 Bcf of gas in storage. Bentek said it expects the East region to withdraw 35 Bcf, while the West and Producing regions pull 7 Bcf and 4 Bcf, respectively.

Wednesday afternoon’s ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, zeroed in on a 44.5 Bcf withdrawal for the week.

The number revealed Thursday morning will be compared to last year’s 110 Bcf pull for the week and the five-year average withdrawal of 131 Bcf.

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