Shrugging off what appeared on face value to be a bearish natural gas storage report, February natural gas futures on Thursday morning chose to follow the weather story instead, jumping significantly higher following two consecutive days of decline. The prompt month peaked at $6.52 on the session before settling at $6.445, up 50.2 cents from Wednesday’s settle.

The Energy Information Administration (EIA) reported that 88 Bcf was pulled from natural gas storage for the week ended Jan. 7, coming in below the industry consensus average of 105 Bcf and even further below a number of individual projections, which had the number pegged as high as 140-166 Bcf (see Daily GPI, Jan. 13). Citigroup’s Kyle Cooper came close to actually guessing the number with his 89-99 Bcf pull projection. ICAP’s storage options auction on Wednesday revealed an implied market forecast of an 80 Bcf draw. Cooper had said that a withdrawal within his range would be considered slightly bullish on a temperature-adjusted basis.

“An 88 Bcf withdrawal was within what the market was expecting, so at least the initial reaction — up — really shouldn’t come as much of a surprise,” said Advest Inc.’s Jay Levine. “On the surface, an 88 Bcf withdrawal is not bullish, but tell [that] to the market. I’ve been telling you that while I’m not going to call this complex bullish (it’s not), I’m also of the opinion that it’s not all that bearish either.”

The storage report did not receive much attention due to the current weather outlook. If a cold “superfront” really does continue to make its way down from Canada into the Midwest and portions of the East over the next few days as predicted by some independent weather forecasters, then bulls could be given fuel for this rally (see Daily GPI, Jan. 10).

“I would agree that the storage report was not ragingly bullish” a Washington, DC-based broker. “I think weather definitely played a role. The interesting thing is that over Tuesday and Wednesday, natural gas wasn’t pricing any of the potential weather in while heating oil had been attempting to rally on that exact news.

It did not make a lot of sense to me because this cold weather is expected to move down through the upper Midwest first — namely gas country — before it possibly reaches the East Coast,” he added. “The fact that heating oil was rallying and gas was not was a bit confusing, but it appears natural gas took care of that confusion on Thursday.

“There is also the view that some people might be doing some protective buying ahead of the long holiday weekend, just in case the cold weather does materialize,” he said, noting that Nymex wraps up trading on Friday at 1 p.m. and is closed on Monday in observance of the late Martin Luther King Jr.’s birthday.

Noting that natural gas futures on Thursday almost got up to the $6.55 high from Jan. 10, the broker said he expects this to be something to watch in Friday’s shortened trading session. “Once we get through that level, my next target would be $6.93, which I think we have a chance of getting to pretty quickly.”

As to whether the downtrend is over, the broker said that natural gas normally puts in a seasonal low around this time of year. “Some of the moving average systems we look at have moved from being a solid down market since Halloween to crossing over a little bit,” the broker said. “Perhaps we are in an intermediate bottom here. I am not so sure that those people who are calling for $5 gas is the safest bet as they seem to say it is. Yes we have plenty of storage, but the market is clearly concerned. We could be hammering out a little bit of a bottom here.”

A forecast by Weather 2000 released Wednesday called for a portion of arctic air in Canada to “burst forth” into the Midwest and Great Lakes later this week and weekend. “Minneapolis will see daily highs that don’t reach zero (20 to 25 degrees below normal), while St. Louis and Cincinnati will only have 20’s for highs (15 degrees below normal),” Weather 2000 said. “The cold air plunge will moderate somewhat for the rest of the East and South, but will still be polar in nature, bringing daily departures of four to 10 degrees below normal.”

The latest six-to-10-day outlook from the National Weather Service on Thursday has a large portion of middle America and the West experiencing above normal temperatures, while the entire East is expected to see below normal readings.

Working gas in storage now stands at 2,610 Bcf, according to EIA estimates. Stocks now stand 152 Bcf higher than last year at this time and 321 Bcf above EIA’s recalibrated five-year average of 2,289 Bcf.

In order to sort out historical alignment problems when a rare year — such as 2004 — generates 53 weekly reports instead of 52 (see Daily GPI, Jan. 7), the EIA said Thursday that beginning with this report it has implemented a daily interpolated average approach to calculating the five-year summary statistics reported in the storage report.

“The daily interpolated average approach facilitates simple yearly comparisons of the data, unencumbered by possible confusion associated with ordering weekly data,” the EIA said in its methodology appendix on computing the five-year average for storage.

According to the agency, the calculations are based on daily linear interpolations of the working gas inventory values between each week reported in the Historical Weekly Storage Estimates Database. Using the historical data, daily data are derived by:

“With the resulting daily working gas time series, five-year averages are computed for each day of the year, using the preceding five years of daily estimates,” the EIA said. “For example, the five-year average used as reference for 01-07-2005 includes the data for 01-07-2000, 01-07-2001, 01-07-2002, 01-07-2003, and 01-07-2004.”

The EIA noted that Lower-48 states minimum and maximum values that are used in the storage graph included in the storage report are based on a similar treatment of the weekly data. However, regional working gas maxima or minima are calculated on a “noncoincident basis” and so will not necessarily sum to the maxima or minima determined for the Lower 48 states.

The new year-ago numbers for each week in 2004, along with the weekly five-year average, is available on the EIA’s Web site at:

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