After trading higher for most of the session, natural gasfutures tumbled lower in the last hour of trading as traders wereable to look past higher crude oil prices to instead focus onbearish storage and weather concerns. As is usually the case, theprompt month led the charge, falling 21.1 cents lower to close at$5.228.

According to the American Gas Association, 29 Bcf was injectedinto underground storage facilities last week, bringing totalworking gas to 2,571 Bcf or 78% full. While that refill might seembullish when compared to last year’s 42 Bcf addition or thefive-year average build or 58 Bcf, it was deemed bearish because itfell in the upper half of the 7 to 40 Bcf range of marketexpectations.

After learning of the storage number, the market shed 15 centsoff the November contract in less than five minutes. Traders wereonce again astonished by the market’s ability to move dramaticallymoments after the storage report was released. This volatility hasbeen chalked up to the lack of limit orders that exist both aboveand below the level at which the market is trading just prior tothe report. Traders, who do not want their orders exercised in theimmediate knee-jerk reaction, elect to pull those orders just priorto the release, a broker said. The result is a market that can movealmost freely either up or down each Wednesday afternoon. Thenumbers speak for themselves. Wednesday has been a tough day forthe November contract since it became the prompt month three weeksago. On the first two Wednesdays of the month, the contractexperienced a 15-cent rebound and a 37.4-cent price spike,respectively, compared to yesterday’s 21.1-cent decline. How’s thatfor volatility?

George Leide, of New York-based Rafferty Energy Group, said itwas tough to pick a storage number this week. “Of the utilities andmarketers I surveyed, five thought we would get a 28-32 Bcfinjection and three called for a single digit injection. There wasnobody in the middle,” he said.

A possible explanation for the difficulty predicting a injectionfigure this week was the high number of degree days heating thatwere tallied during last week’s cold snap. In an attempt toestimate storage figures each week, market watchers do regressionanalysis based on historical degree-day figures. According to theNational Weather Service, the U.S. averaged 80 degree-days heatinglast week, compared to a norm of 56 and a measly 39 last year.Plainly put, the average temperature last week across the U.S. was11.4 degrees below the 65 degree-base or about 54 degrees.Comparatively, the historical average for last week is 57 degreesand last year it was about 59 degrees.

Leide said the first indication of market weakness yesterdaycame well before the storage report was released. “We saw bigresistance in the $5.48-50 range that corresponded to the gap lowerearlier this week. When it became apparent the market would couldnot break above that level, it was the first sign the market waslosing momentum.”

Now that the market has breached trend support at $5.28, Leidelooks to another layer of trend support in the $5.17-19 area. Drawnby connecting lows posted on July 26 and Oct. 6, that trendlineshowed support at $5.177 Wednesday. Due to its upward slope, theline will gain about a penny and a half a day, which means it willlikely support the market at $5.192 Thursday. A break of that levelwould put the burden of additional support on $5.15-165 and$4.92-93. Don’t try to anticipate the breaks below support byselling too early, warned Leide. Sell as the market moves belowsupport and keep your stops tight, he said.

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