Futures managed to continue bounding higher Wednesday, but the physical market saw only modest gains around the country except for spots in the Northeast, which fell mostly between 25-45 cents.

The physical market made a half-baked attempt to advance with futures, but ended up coming in well short. Quotes varied widely with Texas points higher by six to eight cents, but Gulf and Midwest quotes came in at around two cents higher. At the close of futures trading, however, February had jumped 17.5 cents to $2.729 and March had gained 16.8 cents to $2.769. March crude oil rose by 45 cents to $99.40/bbl.

“It looks like the gains in the physical market are an attempt to follow the futures higher,” said a Mid-South utility buyer. He added that he didn’t see anything in the market that would prompt him to do any buying and said his company was using its baseload gas and storage and had not had to use the cash market much at all.

The buyer noted that not only were high temperatures above normal but low temperatures were also higher than what would normally be expected. “We are short natural gas on any given winter day, and we shore that up with storage or prompt-month purchases. We have been using storage,” he said.

Gains in the Lone Star State were above average. Waha was eight cents higher along with Ship Channel at 6 cents higher. Katy was also up six cents as well as Carthage. Gulf gains were more modest. Henry was flat on the day.

Buying interest was also tempered at Great Lakes points. “We did buy a little gas, but we have to be careful and not overfill storage,” said a Midwest buyer. He added that his company would be finishing up the month on Friday and “we are trying to get customers to give us a read on their meters so they can predict how much they should be buying for the rest of the month.”

Michigan Consolidated was seen up two cents at $2.79 and Chicago Citygates was unchanged at $2.73.

Eastern points led the market on the downside with Algonquin, Iroquois, and TransCo Zone 6 posting hefty declines. Algonquin next-day deliveries fell 25 cents to $3.90, Iroquois Zone 2 was off by 45 cents at $3.62, and Transco Zone 6 into New York was down 18 cents at $3.18.

The day’s double-digit gains in the futures market didn’t give traders a sense that the gains were likely to continue. “It looks like we may be in a rangebound market for a couple of days,” said Tom Saal, vice president at INTL Hencorp Futures in Miami.

Saal is a proponent of Market Profile and said there is no indication a market bottom is in. “I can’t call it a bottom because I don’t have a [Market Profile] pattern that says it’s a bottom. The patterns say to me that the market is bouncing and we haven’t taken any trend lines out yet.”

The bouncing may continue with the release of storage data Thursday by the Energy Information Administration. For the first time in many weeks estimates of the 10:30 a.m. report are about in line with historical withdrawals. Last year 184 Bcf was withdrawn and the five-year average is for a pull of 173 Bcf.

Kyle Cooper of IAF Advisors expects a decline of 185 Bcf and Ritterbusch and Associates forecasts a pull of 179 Bcf. A Reuters survey of 24 traders and analysts resulted in a sample mean of 168 Bcf with a range of 124 Bcf to 191 Bcf. Industry consultant Bentek Energy, utilizing its North American flow model, calculated a withdrawal of 183 Bcf, but it cautioned that it could go higher.

In a report Bentek said it “considers the 183 Bcf withdrawal to have most of the risk to the high side again this week. The low gas price environment should incentivize demand and therefore larger draws. Additionally, more withdrawals could take place to ensure capacity holders on storage facilities meet any cycling or other requirements.”

Technicians see the case for a market bottom gaining traction but caution that recent lows need to hold. “While natgas had trouble continuing higher Tuesday, the intraday RSI [relative strength indicator] suggested a pause was needed before higher highs were possible,” said Brian LaRose, an analyst with United-ICAP. “Now that we have had a pause, can the bulls continue the march higher? As long as natgas can avoid breaking below $2.293 from here the case for bottoming will remain intact. Sink below $2.293 and a test of $2.087-1.964 will be anticipated.”

This week’s storage report is likely to track historical averages, but if heating requirements are any guide, next week could mark a return to increasing surpluses.

For the week ended Jan. 28 the National Weather Service predicts below-normal accumulations of heating degree days (HDD). New England is expected have 210 HDD, or 73 fewer than normal, and the Mid-Atlantic is expected to see 195 HDD, or 69 fewer than the norm. The Midwest from Ohio to Wisconsin is forecast to have 215 HDD, or 79 fewer than normal.

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