Traders made it two in a row yesterday at the New YorkMercantile Exchange as they covered shorts and bid up natural gasprices for the second straight session ahead of cooler weatherexpected next week.

After a strong showing during the Wednesday night Access tradingsession, the January contract checked lower at the open yesterday.However, the selling quickly dissipated leaving buyers to driveprices up throughout the rest of the day. The prompt contractfinished near its daily highs, up 6.8 cents to $2.461.

Several traders were impressed by the market’s ability toovercome an undeniably bearish storage report released Wednesdayevening by the American Gas Association. The AGA surprised manymarket watchers by estimating that 5 Bcf was injected intounderground storage facilities last week, a time when withdrawalsof more than 50 Bcf is the norm. However, traders also were quickto point to weather forecasts for key gas consuming areas along theEast Coast calling for below-normal temperatures as a supportivefeature for the market.

Tim Evans of New York-based Thompson Global Markets echoed thatsentiment and believes that the market tested both hypothesizesyesterday by moving lower then pushing higher. “There is not aclear fundamental picture. Storage and weather are two competingforces right now,” he noted.

However, that may be changing. Evans believes it is never tooearly to peek ahead at the next storage report. The averagehistorical withdrawal for next week’s report is 45 Bcf and Evansestimates that is a good barometer this year, taking into accountlower degree days heating and lower deliverability. When comparedwith last year’s 27 Bcf injection, a withdrawal of that magnitudewould nearly double the year-on-year storage deficit from itscurrent 76 Bcf level.

Of more immediate concern, however, is cash prices, which aretrading at a 40-cent discount to the January futures contract andlikely will see more downward pressure today as industrial loaddrops for the weekend. “We could easily dip back into the $2.30s[Friday] and then push higher next week,” Evans said. “We areforming a round bottom, which is what you get when you don’t have adramatic event to create a sharp reversal.”

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