Despite moderating temperatures pervading much of the countryyesterday, gas futures were able to inch higher and take back asmall portion of recent losses as traders positioned themselvesahead of the release of fresh weather and storage news. March andApril contracts closed up 4.5 cents a piece at $2.54 and $2.507,respectively, while the 12-month strip grew 3.3 cents to $2.614.

“Reasonably cautious,” said John Saucer of Salomon Smith Barneyto describe Wednesday’s scant 4.5-cent trading range. Cash priceswere stronger which provided some direction for futures, he added.

In addition to supportive cash prices, the futures also receiveda boost from expectations of bullish storage and weather news,traders agreed. As it turned out those predictions were correctbecause the National Weather Service and the American GasAssociation delivered a bullish one-two combo yesterday afternoon.In their latest 6-10 day forecast the NWS said temperatures acrossthe northern third of the country are expected to cool back down tonormal next week. Meanwhile the American Gas Association said ahefty 213 Bcf was pulled from underground storage facilities lastweek, decreasing current working gas levels to 1,562 Bcf or 48%full. Because that withdrawal was more than last year’s 93 Bcf, theyear-on-year deficit rose 120 Bcf to 384 Bcf.

However, for Saucer the withdrawal was bullish not because itmore than doubled last year’s tally (that was already factored intothe market), but rather because it exceeded most marketexpectations. SSB internal estimate called for a withdrawal of 188Bcf but there was hearsay of 200-plus Bcf circulating, he said.”[The actual withdrawal] was either above or at the top end ofexpectations. Either way, it was supportive,” he admitted.

At least initially the market concurred, as March prices rose2.5 cents to $2.565 in after-hours trading.

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