After slipping lower Wednesday morning in concert with weaker crude oil futures, the natural gas futures market stair-stepped higher in the afternoon to post a positive close for the session. Although slight, the 0.8-cent advance was the fifth-straight daily advance for the November contract. It finished at $5.148, up nearly 60 cents from last Thursday’s $4.565 low.

Sources polled by NGI Wednesday were quick to point to the early sell-off in crude oil futures as a central factor in the gas market’s early retrenchment. Entering the session overbought, crude oil futures were hit with a double whammy of bearish news when the API and DOE reported larger than expected inventory builds of 8.2 million barrels and 5.4 million barrels, respectively, last week. By 11 a.m. EDT, the November crude contract had carved out a new low for the week at $29.45 per barrel.

But the crude oil market was not the only market impacting gas futures. After having lagged the futures market during the recent rally, the cash market moved higher Wednesday morning in a desperate attempt to play catch up. In contrast to the typical 10-cent spread, the chasm between October cash prices and November futures prices surged over the past week to as much as 50 cents.

The combination of the physical market rally and the futures market decline early Tuesday reduced that premium to about 15 cents at one point during the morning Wednesday. Bulls were quick to detect the overcorrection, however, and bid futures prices higher late in the session. At $5.148, November futures finished roughly 30 cents above NGI’s Henry Hub October cash average for Thursday’s gas flow.

Looking ahead, physical gas prices and crude oil futures will step aside Thursday morning as the primary market movers. Instead, gas futures traders and market watchers will be focused on the latest weekly gas storage report. Armed with last week’s impressive heating degree day tally (62 versus 37 normally), market-watchers are focused on a 60-78 Bcf refill, which would exceed the five-year average injection of 57 Bcf, but fall short of the recent string of 100 Bcf refills.

The weather has warmed considerably since last week, however, and that has some market watchers looking ahead to a larger injection next Thursday. All told, it has been hard to ignore the fact that except for last week, it has been a mild start to the winter heating season. “[With] all the talk of [cold temperatures], we had to laugh when the sportscasters at the Cubs-Marlins game [Monday night] mentioned the evening temperatures in the 60s, down from an afternoon high in the 80s,” said Tim Evans of IFR Pegasus in New York, noting that the game was played in Chicago, not Florida.

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