After a quick dip back below $5.00 on the heels of Thursday morning’s bearish storage report (withdrawal of 86 Bcf), natural gas futures clawed their way back into positive territory for the day as traders continued to price in the latest weather forecasts. The February contract finished very strongly at $5.304, up 14.3 cents for the session and more than 30 cents above its $4.97 morning low.

According to the Energy Information Administration, working gas in storage was down 86 Bcf to 2,331 Bcf as of Jan. 3. The withdrawal was immediately deemed bearish because it fell below the 98-120 Bcf common range of expectations, the 123 Bcf withdrawal for the week ending Dec. 27 and last year’s 199 Bcf withdrawal. Adding to the report’s bearishness was a revision to the EIA’s historical figures, which served to lower the five-year average level of stocks by 21 Bcf. At 2,331 Bcf, storage levels are currently only 2 Bcf less than the five-year average (2,333 Bcf).

The year-on-year deficit also was compressed as a result of the paltry withdrawal. After climbing to a 575 Bcf deficit in late December, the year-on-year differential has shrunk in back-to-back reports to 459 Bcf.

And while storage news will trump weather forecasts for nine months out of the year, the supply data yesterday took a back seat to the latest governmental weather outlooks. According to the latest medium-range forecasts released Thursday by the National Weather Service, below normal temperatures are expected over the entire eastern half of the country for the Jan. 15-23 time frame. Mild temperatures are expected west of the Rockies, with seasonal mercury readings across much of the western Plains.

Looking ahead, however, it will be two weeks until those forecasts have an impact on storage withdrawals. Citing the relatively mild weather experienced by the nation this week, Thomas Driscoll of Lehman Brothers in New York calls for next Thursday’s storage release to show a 105 Bcf withdrawal, which will fall short of the year-ago comparison of 142 Bcf.

And while storage data may now be weaker than it has been at any point thus far this winter, the technical side of the market has never looked more supportive. By virtue of its strong rebound off the $4.97-5.00 area and its $5.304 close, the February contract is now poised to make a run at prior highs of $5.42 and $5.47. A break though those levels could expose the March 2001 high at $5.71 as an objective, an analyst said.

However, if the initial push higher fails Friday, it could result in a wave of pre-weekend profit-taking. Support at $5.21 could cushion the market’s fall, but recent volatility suggests that the move could become exaggerated. Still, Thursday’s $4.97 is probably out of reach, chartists agree.

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