For the third session in a row, natural gas futures opened in negative territory. However, in sharp contrast to the restrained buying seen Monday and Tuesday, the market accelerated higher Wednesday amid waves of technical and fundamental buying.

The January contract received the biggest buying boost, advancing 24.6 cents to close at $6.993. February pulled even with January at $6.993 with a 20.7-cent gain, and the March contract lagged behind, adding only 10.7 cents to close at $6.588. Left almost entirely out of the rally was the summer 2004 strip, which increased only 0.3 cents to $5.054.

Traders polled by NGI said prices moved decisively higher on a one-two combination of bullish cash market prices and supportive chart patterns. By opening up nearly unchanged and refusing to drop lower despite the losses in the overnight Access trading session, the cash market sent a bullish signal early Wednesday. “Traders were quick to realize that January futures should be trading at a premium to December cash,” noted Ed Kennedy of Commercial Brokerage Corp. in Miami. “Henry came out trading $6.55-60, and it didn’t take long for traders to bid up January futures.”

However, strong cash prices were not the lone catalyst Wednesday. Also at work were supportive technical factors, which suggested higher prices were a possibility. “Assuming gas finds support at $6.54-60, we’ll look for the following rally to reach about $7.10-30,” wrote Craig Coberly of GSC Energy in Atlanta in what turned out to be a prophetic note to customers Tuesday night. No sooner had the January contract dipped exactly to $6.60 then buyers stepped in to lift the prompt month to a spike high at $7.10.

But just like other moves in the past couple weeks, Wednesday’s rally may have been overdone; leaving open the possibility for some downward consolidation Thursday. Intermediate-term weather forecasts from the National Weather Service now call for mild weather for key Western, Midwestern, and Northeastern regions of the country through at least New Year’s Eve. Only Florida, is expected to see cooler-than-normal readings for the Dec. 23-31 timeframe. Private weather outlooks remain mixed, with at least one major forecaster sticking to his prediction for a chilly conclusion to the year.

However, weather, cash prices and technical indicators will all be shelved for a period Thursday while the market digests the latest storage data from the Energy Information Administration. Consensus estimates are centered around a withdrawal of 130 Bcf, with a range of 110-150. If realized, a 130 Bcf withdrawal would be modestly bullish versus last week’s 111 Bcf draw and the five-year average takeaway of 94 Bcf. Versus last year’s 159 Bcf, however, the withdrawal figure might be viewed as bearish.

In daily technicals, January has support at the confluence of Tuesday’s and Wednesday’s lows at the $6.60-61 level. On the upside, Kennedy sees resistance to the market trading above $7.00 until there is some agreement among the various private and governmental weather forecasts.

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