After failing to break through psychological support at $7 over the previous three sessions, natural gas futures on Thursday decided to check out the upside for a change as the January contract reached a high of $7.425 before closing out the day at $7.330, up 14.5 cents from Wednesday’s finish.

The Energy Information Administration (EIA) reported Thursday morning that 88 Bcf was removed from underground storage for the week ended Nov. 30. The withdrawal was slightly larger than expected, which was helping to prop up futures prices in morning trade.

After trading higher in the overnight electronic Globex session, January natural gas futures continued to run higher in Thursday morning trade. The prompt-month contract was trading at $7.360 just prior to the 10:30 a.m. EST storage report and had moved to $7.400 in the minutes that followed.

Some market experts acknowledged that the week’s storage report was bullish but added that the report might be even more telling about previous and future withdrawals. “The draw was larger than generally expected and suggests that last week’s smaller than expected 12 Bcf draw may have been on the low side — possibly a timing issue between the two periods,” hypothesized Tim Evans, an analyst with Citigroup in New York. “Nonetheless, the larger draw this week suggests we ought to look at boosting our estimates for future weeks as the balance in the market may have shifted.”

Other market insiders noted that the warmer-than-normal forecasts for late next week are making it very difficult to be a bull on natural gas. “Currently, there is no shortage of natural gas in the Western Hemisphere,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “What we are seeing here is that the futures got tired of knocking on the $7 door, so now we are giving the upside a try. My first objective is $7.510-7.515, but anything above that I think is going to trigger selling.

“We still have those forecasts that are in agreement that a warm-up is coming late next week and that above-normal temperatures will linger through the end of January,” he added. “It is tough to buy in that type of climate, and more importantly it is easier to sell. With all of the hedge and commodity funds holding a significant amount of short positions, the one thing that could really shake this market up is if the forecasts turn out to be wrong. If the weather forecasts are wrong, we could get a big surprise in futures, which would be driven by the cash market. We wouldn’t have much backup either because the liquefied natural gas market is an arbitrage market. Gas prices in Asia are higher, so where do you think those cargoes are going to go?”

Ahead of Thursday’s report, the industry had been looking for a withdrawal in the low 80s Bcf. During the similar week last year only 14 Bcf was removed from underground stores. The five-year average for the date is a 60 Bcf withdrawal. A Reuters survey of 22 industry players had been expecting an average draw of 81 Bcf, while Golden, CO-based Bentek Energy said its flow model anticipated an 83 Bcf withdrawal.

As of Nov. 30, working gas in storage stood at 3,440 Bcf, according to the EIA. Stocks are still 32 Bcf higher than last year at this time and 273 Bcf above the five-year average of 3,167 Bcf. For the week, the East region pulled 45 Bcf, the Producing region removed 29 Bcf and the West region withdrew 14 Bcf.

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