Natural gas futures prices stabilized late Wednesday after sinking to a new two-day low following the AGA announcement that 22 Bcf had been withdrawn from underground storage last week. The January contract settled at $2.719, down 8.4 cents for the session but well above its late-session low of $2.63. Estimated volume was light, as just 67,503 contracts changed hands.

According to the AGA, 16 Bcf was withdrawn from the Consuming Region West and 10 Bcf was withdrawn from the Consuming Region East. The Producing Region, meanwhile, experienced a 4 Bcf injection. The net withdrawal of 22 Bcf for the country was well within the market’s 10-40 Bcf range of expectations. However, the takeaway was undeniably bearish as it fell short of comparisons with last year (158 Bcf withdrawal) and the five-year average (69 Bcf withdrawal). Total gas in storage now stands at 3,106 Bcf, a record 835 Bcf above year-ago levels and 477 Bcf above the five-year average.

Despite bearish fundamental data, traders are hesitant to sell this market on the fear that increasingly price constructive technical factors will continue to lift the market higher. For Jay Levine of Advest Inc., this technical/fundamental disagreement leads him to believe that prices will stay range-bound for the time being. “As bearish as this thing is from a fundamental perspective, I don’t see January trading much below $2.50 this early in December… Nor, for that matter, do I see it trading much above $2.50.” That being said, Levine is suggesting his clients might want to take a look at selling a $2.50 straddle for January.

Peter Hattersley of New York-based Rafferty Technical Research agrees that the market is stuck in a trading range and points to the market’s ability to close above the $2.66-67 area yesterday as positive. “My new [momentum] swing number is $2.66-67. If we didn’t hold that level [Wednesday], we would have fizzled lower, possibly testing the $2.50 support level.”

On the upside, Hattersley targets resistance at $3.02, and adds that the downtrend will be dealt a serious blow if January can move above February. “We have seen that spread compress from 14 cents last week to just 7 cents today. If January trades above February, you do not want to be short,” he said.

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