With a little encouragement from the petroleum complex’s sizeable losses on the day, January natural gas futures found their way below the $7.40 level briefly before settling at $7.413, down 20.7 cents on the day. Attention now turns to the Energy Information Administration’s (EIA) natural gas storage report release Thursday morning, where there are still more questions than answers.

Sparked by higher than expected inventory reports across the petroleum complex, both heating oil and crude plummeted in Wednesday trading. January crude fell $3.64 to settle at $45.49/bbl, while January heating oil decreased 8.9 cents to close at $1.3293/gallon.

The wild price moves on the petroleum side refreshed memories of natural gas’ activity last Wednesday, only this time in reverse. Following the EIA’s shocking 49 Bcf withdrawal report for the week ended Nov. 19, January natural gas futures ahead of the holiday weekend jumped $1.018 to settle at $8.639 (see Daily GPI, Nov. 29).

Summing up the present action, a Washington, DC-based broker said it looked like natural gas was a passenger in Wednesday’s trading. “While natural gas was not the highlight of the day, it was clearly sympathetic to the petroleum complex,” he said. “With the natural gas prompt month down at $7.41, we think that the market has entered a trading range with support now around $7.04.”

Looking at the January chart, the broker said basis support begins at around $7.14 and goes down to $6.75. However, he noted that the continuation chart shows some support just under the current $7.41 level, with more major support residing at $6.60, which is where last Wednesday’s infamous trading session started.

“Now that heating oil is starting to come around, I think that will add to the weakness in the markets,” the broker said. “I believe heating oil could lose another dime, which would bring us into the low $1.20s/gallon. That will of course encourage natural to move down as well.”

Since the 49 Bcf report blew all of the market’s estimates out of the water last Wednesday, speculation has run rampant on what will take place this week. Some believe that the sizeable report was likely legitimate, while it appears that the majority expects the EIA to release a revision or correction.

As to what will likely transpire Thursday morning, the broker responded, “I have no idea.” He added that he wasn’t completely sure what all of the fuss was about in the first place. “With as much natural gas inventory as there appears to be in place, who gives a damn?” he asked. “It is not like we are hurting for gas heading into this winter.”

Advest Inc.’s Jay Levine said that assuming the EIA puts out a downward revision, he would expect a sharp sell-off. “The flip side is no revision, a quick pop maybe even up to $8, then maybe a big drop,” he said. “Something is helping hold natgas up — relatively speaking — so well [Wednesday], and I suggest that that something more than likely is confusion. We’ve been there before.”

Looking at his next support lines for January natural gas, Levine said he targets the $7.25/$7.20 area, then cracking that $7 barrier down to $6.95 and to $6.90. As for resistance, Levine pointed to the $7.50 to $7.55 level for Wednesday night and Thursday. Beyond those levels, he sees the $7.90 area maybe up to and including $8. “I know, or at least think I know, it’s not staying here,” Levine added.

The EIA’s report for the week ended Nov. 26., which will be released at its normal time Thursday morning, will be compared to last year’s 59 Bcf draw and the five-year average pull of 41 Bcf.

Citigroup’s Kyle Cooper said Wednesday that he is looking for a report ranging from a 7 Bcf draw to a 3 Bcf injection. He noted that his estimation was “far smaller” than the Bloomberg survey, which was calling for a consensus draw of between 18 and 25 Bcf. “A combination of pipeline data and a Thanksgiving holiday effect are responsible for the estimation of only a small withdrawal,” Cooper said. “We would note a much larger than expected draw in the West could lead to a bigger withdrawal than anticipated.”

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