Weighed down by falling cash market prices, the natural gas futures market slipped lower Wednesday as traders took profits following a two-day, 90-cent rally earlier in the week. Bearish expectations ahead of Thursday’s storage report were also seen as a factor, and the market was quick to react with a gap-lower opening Wednesday morning. The February contract finished at $6.878, down 20.4 cents for the session.

While the 56-90 Bcf withdrawal expectations for Thursday’s storage report span a wide range, none of the estimates would be good for market bulls who have come to expect storage draws of roughly 150 Bcf at this time of year. The three-year and five-year average withdrawals are 146 Bcf and 148 Bcf respectively.

However, a combination of warm spells and industrial plant shut-downs can sometimes reduce the need for natural gas over the holidays and that was evident last Wednesday when the Energy Information Administration announced a paltry 80 Bcf draw for the week ending Dec. 26. The market responded accordingly, sliding 41 cents in the abbreviated trading session on New Year’s Eve.

But market observers don’t necessarily look for a repeat of that softness this week, warned Tim Evans of IFR Pegasus in New York. He noted that at least the market is bracing for a modest withdrawal figure this week. Although he admits the data could be more bearish than expected, Evans is quick to note that the pullback in the market [Wednesday] helps to “discount that possibility, actually putting the market in a stronger position to accept the expected 70-80 Bcf net withdrawal with good grace and move higher anyway.”

Should the market have the urge to move higher after the storage data is released, it has the green light from the latest weather forecasts. Below-normal temperatures are predicted for the eastern half of the nation in the latest six- to 10-day forecast released from the National Weather Service Wednesday. Even more bullish is the longer-lead, eight- to 14-day outlook from the NWS calling for below-normal temperatures for nearly the entire country for the Jan. 15-21 timeframe. Only the southwestern corner of the country is expected to see seasonal readings during that period.

In daily technicals, Craig Coberly of GSC Energy in Atlanta was cautiously bullish. “The wave pattern visible on the intra-day charts will have a ‘more perfect’ complete look with one more move above [Tuesday’s] high of $7.25. Based on this, the short-term outlook is for gas to move higher to achieve calculated objectives in the $7.50-54 range.” On the downside, Coberly is watchful of a break of support at $6.75. Should that occur, he sees the potential for a quick check lower to the $6.00-15 area before the market would encounter support.

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