As any real sign of true cold in the near-term weather forecast continued to dissipate Thursday, natural gas futures bears continued to have their way as the December contract probed lower values. Despite a $2.08/bbl increase in December crude on the day, December natural gas ended up dropping 8.7 cents to finish at $6.318.

Since Monday’s 49.1-cent gain to close at $7.248, December natural gas has dropped 93 cents over the last three regular sessions. Averaging out the week to date, the prompt month has lost 43.9 cents since last Friday’s close. Even more impressive was the contract’s $6.084 low on Thursday, which brings the front-month low for the move of $5.990 — recorded by the November futures contract on Oct. 27 — back into play.

Citi Futures Perspective analyst Tim Evans said gas futures continue to probe the downside, likely fueled by temperature forecasts swinging back to a less bullish outlook than Wednesday’s midday report. “Readings for much of the East will still be eight to 12 degrees colder than normal, but this is apparently still not of concern to natural gas traders,” he said. “We think they will have at least two more chances to react to this weather pattern, once when the thermometer falls next week, and again when the resulting storage data is reported.”

Speaking on commodities in general, a team of analysts at Barclays Capital Research said bearishness continues to prevail. “The signals that commodity prices are moving ever further below long-term equilibrium levels continue to proliferate,” the analysts wrote in a research note. “However, despite the growing lists of producers cutting output and projects being canceled or deferred, commodity prices show little sign yet of bottoming out. In fact in most energy and industrial metals markets, the price decline has accelerated again over the past week.”

The team noted that the key theme for investors is still one of “risk aversion” as market participants continue to reduce both counterparty and market risk. “Consequently, hedge funds, institutions and retail investors are still liquidating their long positions in commodities, and the downward price momentum that this is causing is feeding aggressive shorting of a number of markets by technical traders.”

Following Wednesday’s trade, some traders said the weak performance by natural gas was reflecting broader economic forces rather than a traditional focus on weather and storage. According to an Oklahoma City broker, natural gas on Wednesday was following crude oil and “trading off a strong dollar, a weak precious metals market and a weak equity market. That all means demand destruction. There is no reason to get out [of a short position].”

Others see a stronger weather connection. “Theoretically, this market should be much less impacted by the dramatic weakening in the U.S. economy since weather is a much larger factor in natural gas demand than is the case in the petroleum complex,” said Jim Ritterbusch of Ritterbusch and Associates. He conceded that a softening economy would have “some impact” on industrial demand for gas, but “we expect that any such declines could be easily offset by a colder-than-normal winter.”

Turning attention to the Energy Information Administration’s (EIA) natural gas storage report for the week ended Nov. 7, which was pushed back a day due to the Veterans Day holiday Tuesday, Citi Futures Perspective’s Evans is looking for a 40 Bcf injection, while a Reuters survey of 24 industry players produced a 38 Bcf to 60 Bcf range of builds with an average injection estimate of 45 Bcf.

Evergreen, CO-based Bentek Energy said its flow model is showing a 48 Bcf build, which would bring stocks 2.5% below the five-year high and 3.1% above the five-year average. The research and analysis firm sees a 22 Bcf injection in the East region and 20 Bcf and 6 Bcf additions in the Producing and West regions, respectively.

The injection revealed Friday morning at 10:35 a.m. EST will be compared to last year’s 4 Bcf build for the week and the five-year average injection of 23 Bcf.

“Going into the withdrawal season stocks in the East are above last year and are now at a new all-time high,” Bentek said. “The year-on-year deficit in U.S. storage levels is in the Producing region where stocks are now 9.9%, or 105 Bcf below last year. The West region is only 6 Bcf below last year and with the forecast calling for at or above-normal temperatures for the next week, stocks could reach last year’s levels.”

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