Pulled down by another in a string of bearish weather outlooks, the natural gas futures market shifted back to the downside Wednesday, rescinding a majority of the gains notched in Tuesday’s session. Caution ahead of Thursday’s release of fresh storage data also contributed to the price decline, with weak longs electing to cash out on Tuesday’s gains ahead of the inventory report.

The December contract finished down 13 cents for the day at $4.739, 2.7% off its $4.896 close Tuesday.

Although short-term weather outlooks are mixed and call for a cool front to sweep across portions of the East late Thursday, the medium range forecast remains undeniably bearish, with above-normal temperatures predicted for much of the country next week. Cash prices reacted to forecasts for a chilly weekend, led by New York delivered prices which surged 40 cents $5.50 level.

Looking ahead, traders will put the weather forecasts aside Thursday to make way for some supply side data. Expectations for the storage report call for a net injection in the 15-37 Bcf range. A year ago the market withdrew a whopping 48 Bcf and the five-year average is a 6 Bcf build. Last week, the near-month contract tumbled 24 cents following news that 34 Bcf had been injected into storage during the last week of October. According to the EIA, the surplus to last year stood at 10 Bcf and the surplus to the five-year average was 95 Bcf on Oct. 31.

However, not all market watchers are predicting a small injection this week. Using his own regional weighted heating degree days statistics, Missouri-based analyst Stephen Smith rounds out the top end of market expectations with a hefty 37 Bcf build. “Heating degree-days were 29 Bcf below normal last week. The Nov. 7 week was also 4 HDDs milder than the Oct. 31 week, which is the main reason for the stronger projected storage build as compared with last week,” he said.

Should a number of that magnitude be reported by the EIA Thursday, prices will likely move lower, testing key support at the $4.60 low reached Monday. If $4.58 holds, said Craig Coberly of GSC Energy in Atlanta, the bulls are still correct and prices could see a rally to Fibonacci retracement percentages up to $5.74, $6.45, $7.02 and $7.59. However, should the market break below $4.58, Coberly would be forced to don his bear coat again, looking for a continuation down to the $4.00 level.

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