Marking the turning in the seasons from injection to withdrawal, the Energy Information Administration (EIA) reported Thursday that 9 Bcf was pulled out of underground natural gas storage for the week ended Nov. 9. With the withdrawal well within industry expectations, natural gas futures continued its recent path of probing the downside, recording a low of $7.650 before closing out at $7.700, down 13.5 cents from Wednesday.

Prior to the storage number’s release, the December contract was trading at $7.855. In the minutes following the 10:30 a.m. EST report the prompt-month was down at $7.725. When the uncertainty of upcoming winter weather looms so large, often supply-price correlations become murky.

“As the number was in line with expectations, there’s not a great deal of immediate leverage for a price move in either direction,” said Tim Evans, an analyst with Citigroup in New York. “Knowing the number does remove some risk of surprise from the market, but that’s about it.”

The industry had been primed to see a small withdrawal. A Reuters survey of 21 industry players produced an average expectation of an 11 Bcf withdrawal. Golden, CO-based Bentek Energy’s flow model indicated a withdrawal of 12 Bcf. The number revealed Thursday contrasted with last year’s 3 Bcf injection and the five-year average build of 9 Bcf.

As of Nov. 9, working gas in storage stood at 3,536 Bcf, according to EIA estimates. Stocks are 87 Bcf higher than last year at this time and 273 Bcf above the five-year average of 3,263 Bcf. The East region, which endured a chill last week, withdrew 15 Bcf for the week while the Producing region stood pat and the West region injected 6 Bcf.

“We get our first withdrawal of the season and the market is finally caring about storage,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Because it wasn’t a large draw and people are realizing we have a whole lot of gas underground, the market shrugged off the report and continued lower.”

I am interested to see what the market does if its able to get down to the $7.500 area. Last time we got down to the $7.490 low, we had something like a 30-plus cent bounce the next day. I don’t even know if the market is going to get to those numbers at this point, at least not at this time. We have support down at $7.580 followed by $7.480 to $7.500.”

Blair noted that the market is likely to take multiple turns over the next few weeks due to weather changes. “In the near-term, it looks like some cold is entering some major eastern population centers. I left home Thursday morning and it was almost 60 degrees, but during the afternoon it was down around 43 degrees,” he said. “So while it is expected to be slightly colder than normal over the next two weeks, all of the forecasters are calling for warmer than normal winters. Maybe the market would need to see a little change in the December forecasts before it really does anything big enough on the upside. If there is no change in the winter forecast, then I think we could start looking at significantly lower price levels.”

Storage withdrawal or not, weather bears may be in control for next week’s report as the National Weather Service forecasts below-normal accumulations of heating degree days (HDD) this week. New York, New Jersey and Pennsylvania are expected to endure 148 HDD for the week ended Nov. 17, or 3 fewer than normal. Ohio, Indiana, Michigan, Illinois and Wisconsin are anticipated to experience 132 HDD, or 40 fewer than normal. This 9 Bcf withdrawal coincides with last week’s above-average tally of HDD. For the week ended Nov. 10 the Mid-Atlantic states recorded 165 HDD, or 28 more than normal and the Midwest states accumulated 171 HDD, or 18 more than normal.

Perhaps a New York broker summed the situation up best. “Why should traders get real bullish on natural gas? No reason at all. Why should they get bearish, not much reason there, for there is so much weather in front of the market.” He added that the market is saying that prices are fair and there is no reason to go higher or lower unless something happens. “Are we going to get some cold weather that is going to shake up this market early?” he queried.

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