While December natural gas futures on Wednesday failed to match Tuesday’s nearly 40-cent gain, the contract also failed to mount any kind of retreat, leaving market bulls in control for the time being. December natural gas gained 3 cents on the day to finish at $7.249, while December crude gave back $5.23 of Tuesday’s gains to close at $65.30/bbl.

“We kept pushing lower and lower late last month and finally found support at $6, which forced the rebound we’re seeing now,” said Steve Blair, a broker with Rafferty Technical Research in New York. “We broke above $7 on Tuesday on some reports of cooler weather, but I haven’t seen it yet. I am not all that sure what prompted the rally. Maybe we are just breaking out on some technicals. If this thing continues to push higher, $7.350 is our next resistance point, followed by $7.540 and $7.800. I think we’ll test that $7.350 area again on Thursday.”

Turning attention to the natural gas storage situation, injection estimates for Thursday morning’s report for the week ended Oct. 31 are ranging anywhere from 12 Bcf to 50 Bcf. The injection revealed by the Energy Information Administration at 10:35 a.m. EST Thursday will be compared to last year’s build for the similar week of 45 Bcf.

“We expect Thursday’s [Department of Energy] storage report to show 35 Bcf in net injections based on the heating degree day accumulations for last week, which would be neutral compared with a 31 Bcf five-year average,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “We do also note, however, that there are some lower estimates in circulation too, with pipeline flow monitors tending toward a lower 20 Bcf forecast. These divergent opinions present the risk for a volatile reaction to the data, almost regardless of what the number proves to be.”

A Reuters survey of 24 industry players produced an average build expectation of 25 Bcf, but Golden, CO-based Bentek Energy said its flow model indicates an injection of 13 Bcf, bringing stocks 3.8% below the five-year high and 2.4% above the five-year average. According to Bentek, cooler temperatures in the East last week resulted in the region’s inventories staying the same, while the West and Producing regions injected 7 Bcf and 6 Bcf, respectively.

“Current stocks are now at 3.4 Tcf and will fail to reach last year’s all-time high inventory of 3.5 Tcf,” the research and analysis firm said. “The forecast calls for mild temperatures throughout the country for next week’s storage number resulting in larger-than-normal injections, but winter is fast approaching.”

With the lack of any real cold in the Northeast, some market participants are having trouble with the low injection estimates. “I am not sure why we would see an injection in the low teens for last week,” said Blair. “Considering the weather we’ve had, I really would expect the injection to be larger than the teens Bcf. If it happens, it happens, but I ‘m not sure I would understand the reasoning behind it.”

Analysts see a renewed linkage between natural gas and a sliding U.S. dollar. As the dollar weakens traders will turn to commodities such as petroleum and natural gas as safe havens, the argument goes, and much of Tuesday’s $6.62/bbl gain in December crude oil was linked to a weakening dollar. The December dollar index futures contract fell Tuesday 1.62 to 85.37, but it has mounted a more or less steady advance since mid-July as petroleum and natural gas prices fell. “Natural gas needed to get to our minimum target [Tuesday] of $7.235, but it really didn’t peak there, it just stalled. It does look like it wants to go a little higher, and there is a case for the dollar going a little lower,” said Walter Zimmerman of United Energy.

“Once the dollar correction has run its course, we expect energy to keel over and take another nosedive. The question is will natural gas? It has been marching to the beat of its own drummer for a few days now,” Zimmerman said. He added that natural gas could fall if the dollar should strengthen and cause other energy contracts to weaken; however, “near term it looks like natural gas has a shot at the $7.810 area.”

As if dollar uncertainties were not enough, traders have to deal with contrasting weather forecasts. The National Weather Service in its latest six- to 10-day forecast shows widespread below-normal temperatures across the interior of the nation. East of a line from Montana to Arizona and south of an arc extending from Minnesota to Pennsylvania is forecast to be below normal. Only Maine and coastal portions of California and Oregon are forecast to be above normal.

On the other hand, AccuWeather.com in its six- to 10-day forecast sees only limited occurrences of below-normal temperatures. It forecasts below-normal outbreaks in two pockets, one in Idaho, Utah and Wyoming, and the other stretching from Illinois to West Virginia. Above-normal temperatures are limited to an area bounded by Texas and Oklahoma east to Mississippi. The remainder of the country is forecast to be normal.

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