Adding to Tuesday’s rebound, the natural gas futures market worked its way quietly higher Wednesday as bargain buyers again narrowly outnumbered speculative sellers. Some short-covering was also seen with traders taking a balanced portfolio approach prior to the release of fresh inventory data. The November contract finished at $4.924, up 4.9 cents for the session and within striking distance of overhead resistance in the $4.98-$5.00 area.

With little or no new fundamental developments Wednesday, traders were reluctant to buck the trend. November futures made an attempt to surpass the $5.00 level early in the session, but ultimately failed. The ensuing selling was light, however, allowing bulls to claim the session as a victory. Not only did the November contract notch a gain for the session, it succeeded in posting a higher high and higher low on the daily bar chart.

As the recent rally and retreat would attest, trading natural gas futures in the month of October can be a dicey proposition. While the first month of the winter strip (November), is the prompt month, the weather is still mild, with an almost equal likelihood of cooling or heating degree day accumulations.

Chilly temperatures started the month off producing hefty regional population-weighted heating degree days of 70 for the week ending Oct. 4. However, the mercury moderated since that time, leading to successive weekly U.S. average heating degree day accumulations of 34 and 59.

Because of the mild temperatures last week, experts are calling for another 75-80 Bcf weekly storage injection. The last weekly storage report showed an 81 Bcf refill and the prior report featured a 75 Bcf build.

If realized, a number of that magnitude would easily eclipse the year-ago injection and the five-year average of 33 Bcf and 51 Bcf respectively. More importantly, an injection of 57 Bcf or greater would put storage levels above the 3,000 Bcf level with at least two more weekly storage reports for October.

And the bearish storage news won’t end when the gas starts coming out of the ground, said Citigroup analyst Kyle Cooper. In fact, Cooper warns that barring another cold winter, total storage draws this winter will lag last winter by 300 Bcf or more, leaving a hefty 1,000 Bcf in the ground next April as the market cycles back to storage injections. This past April, storage dipped to a record low of 623 Bcf.

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