Some traders were surprised by the market’s inability to add to Wednesday’s losses Thursday after breaking below key support at $2.50 on another bearish storage report. According to the AGA, 19 Bcf was withdrawn from the Consuming Region West and 3 Bcf was injected in the Producing Region, resulting in a net 16 Bcf withdrawal for the nation for the week ending Nov. 30 (There was no change in the Consuming Region East). The net withdrawal was well within the range of expectations, which were centered on a draw-down of 10-20 Bcf. However the net takeaway was undeniably bearish as it fell short of comparisons with last year (73 Bcf withdrawal) and the five-year average (55 Bcf withdrawal). Storage is now 30%, or 699 Bcf, above year-ago levels.

Looking ahead, however, market watchers believe the 699 Bcf surplus may be only the tip of the iceberg. According to Ronald Barone of UBS Warburg, the combination of conditions this week and the 158 Bcf withdrawal a year ago are likely to produce a near-100 Bcf increase in the surplus next week. “Thereafter, the industry could easily face a [1,000 Bcf] surplus heading into January, given that the following three withdrawal comparisons are 158, 175, and 209 Bcf. Depending on [first quarter 2002] temperatures, this storage overhang could place tremendous pressure on the spot market in the early part of the year, making deliverability issues virtually irrelevant until the second half of 2002,” Barone wrote in his weekly research note.

According to Reliant Energy’s Weather Sensitive Gas Load Indices (published on page 4 of NGI‘s Daily Gas Price Index), U.S. temperatures so far this week are 27% warmer than the 10-year average and 41% warmer than last year. Based on cumulative data through Nov. 30, it has been 18% warmer this heating season than the 10-year average and 26% warmer-than last year.

However, traders were quick to note that it was the weather outlook for this weekend and not the cumulative weather thus far this season that helped inspire yesterday’s modest price bounce. “Temperatures are returning to normal this weekend in the Northeast, and that will produce some heating load. It is still just the beginning of December, and this proves that people are unwillingly to give up on the winter just yet,” a Houston-based physical trader said.

In daily technicals, January escaped a close call by not funneling lower after settling beneath key support at $2.50 Wednesday. Its low for that session of $2.45 now serves as a crucial pivot point, chartists agree. On the upside, the market did some positive work Thursday by moving above Wednesday’s $2.58 high to notch a repeat of Tuesday’s high at $2.61. Sources expect buy stops are waiting just above those levels. If triggered, they could result in a short-covering rally to at least Monday’s high at $2.69.

Nymex announced that will extend indefinitely the abbreviated trading hours currently in place. “The exchange board made this decision in light of continued commuting concerns and the heavier than normal volumes experienced by the exchange, despite reduced hours,” said Nymex President J. Robert Collins Jr.

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