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NYMEX December gas closes 11.8 cents higher at $4.489/MMBtu

http://www.chemnet.com   Nov 21,2014 Platts
The NYMEX December natural gas futures contract rose 11.8 cents to a $4.489/MMBtu settlement Thursday as the market reacted to continued cold weather and the first storage withdrawal of the season, which also came in slightly above expectations.

It was a volatile day for the front month. The contract spiked immediately after the US Energy Information Administration reported a storage withdrawal of 17 Bcf -- the first net draw of the season. The pull was higher than the 9-13 Bcf most analysts had predicted as well as the 10 Bcf five-year average draw, and left stocks at 3.594 Tcf for the week ended November 14.

But the contract later dipped to the day low before rising again in the last hour of trading.

"There are still a lot of day traders in the market. I'm guessing that pullback was no more than long liquidation" during the session, said Alan Levine, chairman and CEO of brokerage PowerHouse.

"It was the first [storage] decline of the season, and changes like this, whether illusory or not, often give rise to overreaction on the part of traders," Levine said.

Open interest numbers, which have been growing, are still not where they were last year, Levine added. So there are probably "an awful lot of guys who haven't covered their requirements," he said.

"We failed to take out the key $4.50[/MMBtu] resistance," Price Futures Group Senior Market Analyst Phil Flynn said. "I think the market is still a little hesitant to drive too much higher right now," particularly as temperatures are expected to warm back up in many consuming regions over the weekend, he added.

However, after that brief warmup, most forecasts are calling for weather to turn colder again. WSI's 11- to 15-day forecast on Thursday is still calling for below-average temperatures across the eastern half of the US as well as the northern states.

Trading Thursday was mostly technical in nature, said Aaron Calder, senior market analyst at Gelber & Associates.

"Most of this was bargain hunters or long traders trying to defend positions," he said. "This is the same type pattern we've seen for the last four weeks ... as the market trades under the weight of bearish fundamentals, then all of a sudden we see a pop.

"Weather will continue to be the hand that rocks the cradle," Calder added. "The other trend to watch is production and freeze-offs and how high production can get."

Levine said that despite the rally that ran from late October into early November, the latest push higher on the front month seems more "tepid -- it doesn't have much oomph behind it."

"The withdrawal today was just noise in the overall picture," Levine said. Even though gas is still a very weather-sensitive market, "the bottom line of it all is that we're still a very well supplied market. If there's going to be a problem this year it will be same as last year: an infrastructure and citygates problem. It wasn't that there wasn't enough gas around, it was a problem of getting gas from point A to point B."

December traded Thursday in a range of $4.25-4.503/MMBtu.

The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EST (2400 GMT).
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