With all eyes focused on updated weather forecasts and fresh storage data, natural gas traders took a “wait and see” approach Tuesday as light short-covering nudged the prompt contract modestly higher. December finished the session at $2.798, up 6.5 cents for the session and near the top of yesterday’s narrow trading band. A healthy estimated volume of 75,656 was surprising, considering the lack of appreciable price movement.

With weather forecasts mostly unchanged from Monday’s session, traders yesterday set their sights on this afternoon’s release of fresh storage data by the American Gas Association. Because expectations ahead of the release call for either a small net withdrawal or injection, traders agreed that the market was unwilling to bet too heavily on the report. As a result, prices were buoyed slightly Tuesday afternoon by short-covering following Monday’s 19.2-cent price erosion.

However, despite closing near its $2.805 high and notching a 6.5-cent advance for the session, the December contract is far from being out of the woods. In fact, market-watchers were disappointed that the prompt month was unable to make even a passing advance at the top of the $2.83 chart gap produced by Monday’s lower open. Above $2.83, resistance is seen again at $2.86-87 ahead of last week’s highs in the $3.02-08 area.

Looking past this afternoon’s storage report, bull traders are fearful the year-on-year comparisons going forward will be difficult to swallow. Following today’s comparable 6 Bcf net withdrawal a year ago, the market pulled a whopping 94 Bcf and 146 Bcf over the next two weeks, a feat that will be difficult if not impossible to repeat considering the mild weather outlook. For New York-based IFR Pegasus, this could translate into a ballooning of the oft-quoted year-on-year surplus from its current level of 352 Bcf to more than 500 Bcf over the period. That would eclipse the previous surplus high for this year of 471, which led to prompt month prices falling back to $2.37 on Oct. 18.

In daily technicals, support exists first at Monday’s low at $2.70, followed by more substantial buying expected at December’s 30-month low at $2.535. A break lower could pave the way for a test of the $2.40 level, which corresponds with the 38.2% Fibonacci price projection calculated off recent spot highs and lows of $3.44 and $1.76, respectively.

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