Boosted by another morning of strong cash prices, the futuresmarket trudged higher Wednesday as traders gained optimism thatprices may have found a bottom. But that speculation could be a bitpremature because as soon as bulls finished pushing the Januarycontract 1.7 cents higher to its $2.288 settlement the bears tookit lower in after-hours trading. Even a bullish storage report didnot help to dissuade the late selling pressure.

According to the American Gas Association, 69 Bcf was pulledfrom underground storage facilities last week, dropping the totalback below 3 Tcf. While that withdrawal was slightly more than bothpreliminary expectations and the 5-year average, it came in starkcontrast to the 27 Bcf injection that was seen last year.

After watching prices plummet more than a dollar in the last 6weeks many traders were at a loss to explain the large withdrawal,especially considering the above-normal weather much of the countryhas experienced. “There is simply no economic incentive to withdrawgas right now,” a gulf trader said. “The only thing that wouldexplain [the storage report] is ratchet provisions that specify howmuch gas must come out of storage in a certain month.” He went onto suggest that although those levels are not that high forNovember, the lack of substantive withdrawals for the first part ofthe month put many storage customers in a “must-pull” situationlast week. Furthermore, he believes that it is unfair to comparethis week’s figure with last year’s. “You think prices are bad now?Take a look at December of 1998 when Henry Hub prices dipped to$1.00. That’s why the market registered an injection a year ago.”

However, the storage situation may have become academic at leastfor a while. Traders are focusing on the latest weather forecasts.According to the National Weather Service there is no cold weatherin store for the eastern half of the country through next Tuesday.In fact, only Southern California and Arizona are expected to seebelow-normal temperatures, while much-above normal temperatures areexpected for Northern New England and the Great Lakes region.

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