Adding to gains notched Tuesday, natural gas bulls again left nothing to chance Wednesday as they convincingly bid up prices on bullish long-range weather forecasts and ahead of potentially price-constructive storage news today. Since plumbing a four-week low at $3.67 Monday, the November contract has rallied 25 cents to trade back within striking distance of the psychologically and technically important $4.00 level. It settled at $3.918 yesterday, up 5.6 cents for the session.

Following a negative close Friday and then a sour open Monday, market watchers had declared the uptrend dead. However, Gulf Coast supply has been slow to return in the wake of Hurricane Lili and that has cast a bullish shadow on both this and next week’s storage report. According to the Minerals Management Service, 1.38 Bcf/d was still offline as of 11 a.m. EDT Wednesday, a surprising figure considering the storm passed through the Gulf nearly a week ago.

Expectations ahead of Thursday’s 10:30 a.m. EDT release range widely between 26 and 50 Bcf, according to sources. Last week the market sunk 43.6 cents following the Energy Information Administration announcement that a slightly larger-than-expected 47 Bcf was added to underground stocks for the week ending Sept. 27. However, few expect such a large storage injection figure today, as curtailments from Hurricane Lili last week drove cash prices to levels well above the futures market, thereby encouraging storage withdrawals.

Pointing to this “backwardized” market structure, Tom Saal of Commercial Brokerage Corp. in Miami said Wednesday that he would not be surprised to see an injection in the mid- to upper 20s (Bcf). “All the storage players that I talk to say that they were pulling gas like there was no tomorrow…. And why not. Withdraw now and replace it with lower priced supplies later. The economic incentive [to pull from storage] was certainly there.”

NGI’s Henry Hub cash price index gained 5 cents to average $3.91 yesterday. In essence, the cash market came up to meet the futures market, which should be trading at a healthy premium in an injection month, Saal added. Asked how high he thought prices could go this week, Saal called on a technical trick he has learned through the years as a natural gas broker. “Take the range from Monday and Tuesday; in whichever direction prices break Wednesday, add half the Monday-Tuesday trading range for an upside or downside target,” he said. “Since prices broke to the upside [Wednesday], looks like we have a target of $4.00 this week.”

However, bulls may not need any help from fancy technical arithmetic. According to Meteorologist Jon Davis of Salomon Smith Barney, there is a bias toward below-normal temperatures in November and December. If that forecast plays out as expected, it will prompt larger storage withdrawals, which will appear even larger versus last year’s conservative weekly draws, analysts suggest.

In the meantime, it looks like Old Man Winter will be practicing. According to the latest six- to 10-day forecast released Wednesday by the National Weather Service, below normal temperatures are expected across the western two-thirds of the country next week. And while below normal temperatures in October are not as worrisome as below normal temperatures in December or January, they are still likely to ramp up demand for natural gas next week and give traders a taste of what might be coming in the months ahead.

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