Natural gas futures took a long road to nowhere Thursday as prices moved to either side of the recent trading range on waves of local and commercial liquidation and short-covering.

Supported a larger-than-expected storage withdrawal (48 Bcf), bulls were first to strike. However, resistance near $4.00 held, and bears regained control by mid-morning Thursday. After plumbing lower for the rest of the morning, prices were lifted Thursday afternoon by local short-covering. December finished at $3.869, down 0.8 cents for the session.

By virtue of its high near $4.00, its low near $3.80 and its settlement in the mid $3.80s, Thursday’s session was almost a carbon copy of last Thursday, when the market also received a bullish storage report.

According to the Energy Information Administration, there was 3,097 Bcf of working gas in storage on Nov. 8, which was down 48 Bcf from the previous week. Stocks were 90 Bcf less than at the same time last year and 73 Bcf above the five-year average of 3,024 Bcf. In the East Region, stocks were 14 Bcf below the five-year average following net withdrawals of 19 Bcf. Stocks in the Producing Region were 42 Bcf above the five-year average of 810 Bcf after a net withdrawal of 28 Bcf. Stocks in the West Region were 44 Bcf above the five-year average after a net drawdown of 1 Bcf.

At 48 Bcf, the second weekly withdrawal of the storage season fell near the top end of expectations. Market watchers had called for a withdrawal of 5-60 Bcf, with the common range of predictions clustered in the 20-30 Bcf area. A week ago, the EIA reported a 27 Bcf withdrawal for the week ending Nov. 1, which also compared bullishly against expectations between a 10 Bcf injection and a 35 Bcf withdrawal.

Similar to last Thursday, bulls were quick to react to the larger-than-expected drawdown but also were just as quick to give up on the rally. Last Thursday, they were able to post a $4.02 high before being turned back, and while this Thursday they bid prices up to the $4.005 level before giving up ground.

While admitting that the storage report was supportive, Ed Kennedy of Commercial Brokerage Corp. in Miami was quick to downplay the significance of the 48 Bcf withdrawal. Cash was stronger Thursday morning on forecasts for chilly weather in parts of the country this weekend, but looking ahead to next week, temperatures are expected to warm right back up, he said. “As of right now, it looks like we will see above normal temperatures through most of November.”

Looking further ahead, Kennedy is eager to see what the December forecast holds. The National Oceanic and Atmospheric Administration will release its updated 30- and 90-day outlooks next Thursday. “Storage is a known factor and people realize that there is plenty of gas to go around if we continue to see above normal temperatures this winter,” he noted.

Until the market can get a glimpse of December weather, it might have a difficult time breaking out of its recent trading range. That being said, traders might benefit from buying as prices approach the $3.80 level and selling as prices crest $4.00. “The market is adequately priced right now,” Kennedy continued.

Because Thursday’s trading session so closely resembled that from a week ago, it is worth taking a peek back at last Friday’s trading session for insight on what the market might do this Friday (see Daily GPI, Nov. 11). After opening lower and diving down to test support at $3.80 a week ago, the December contract was again boosted by short-covering and finished at $3.903, up 7.2 cents for the session, but down 15.7 cents for the week.

Because of the forthcoming Thanksgiving Day holiday, the Weekly Natural Gas Storage Report for the week ending Nov. 22 will be released on Nov. 27 between 4:30 and 4:40 p.m. EST.

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