For the third day in a row, the futures market caved under heavyselling pressure Wednesday as traders anxiously unloaded longpositions and initiated fresh shorts. Even major support at $2.24offered bulls no reprieve as sellers pushed the December contractdown 7.5 cents to settle at $2.204.

Sources continued to point to the triumvirate of bearishfactors-weather, storage and futures-cash convergence-as reasonsfor the decline. But that was before the release of the weeklyAmerican Gas Association Storage Report released after tradingyesterday. That report, which featured a 45 Bcf net withdrawal,came as no surprise to a majority of the market. Most observerswere calling for a withdrawal within the 20-60 Bcf area. However,the real surprise came in the fine print because AGA said itincreased its full working gas capacity from 3,190 to 3,248 (seerelated story). This effectively altered last week’s total amountof gas in storage from 3,070 Bcf to 3,127, and in the process set anew all-time record for the total amount of working gas stored. Theold record of 3,099 was set in November 1994.

The market reacted quickly in the evening Access trading sessionby pushing the December contract down an additional 3.4 cents to$2.17. A marketer felt the data could only be construed as bearishbecause “not only is there supposedly more gas in the ground, butnow the year-on-year surplus is greater.” The surplus to last yearcurrently stands at 332 Bcf.

But a Houston-based trader feels the $2.10-15 level represents”good value” for December futures. “If you buy December at $2.10, Isay you risk maybe a dime on the downside, but your upsidepotential is much greater. And if the market can find a bottom thisweek, it will have two days of trading next week to rebound.”Looking ahead, traders and analysts are anxiously awaiting theNational Weather Service 30-day and 90-day weather forecasts to bereleased this afternoon.

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