The NYMEX December natural gas futures contract settled 3.9 cents higher at $3.827/MMBtu on Thursday in its first day in the prompt position after a storage report that was largely in line with expectations.
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The rise was likely due to some long-term winter fears and technical trading, analysts said.
"I'm a little surprised" by the move higher, said Gene McGillian, analyst at Tradition Energy. He chalked up the move to "some re-focusing on winter risk. There's a reluctance to be further short going into the winter."
The US Energy Information Administration gas storage report was in line with most expectations Thursday, estimating an 87-Bcf build that lifted total stocks to 3.48 Tcf. But it was much higher than the five-year average injection of 59 Bcf and last year's 45 Bcf build.
A cold front spreading from the Midwest to the East Coast should keep demand aloft through the weekend, but the longer term forecast through mid-November is still showing above-average temperatures in nearly every region, according to the US National Weather Service.
"Saturday is the first official day of the withdrawal season," but the market could instead see injections through much of November, noted analyst Kyle Cooper at IAF Advisors.
"The market hung out from $3.75-$4 for three-and-a-half months this summer, and we've maybe expanded that range a little bit, but not that much," Cooper said.
"However, if we get to Thanksgiving and we're still not seeing net injections then I think this thing will be hit hard," Cooper added.
BNP Paribas analyst Teri Viswanath noted that "while much of this week's buying is likely the result of position-squaring ahead of the November futures expiry, the dramatic reduction in institutional net length this month opens the door to early accumulation ahead of the winter."
"The record inventory build over the summer has led to mostly unabated selling, with the front of the curve shedding 15% since the start of the injection season. The notable exception to this trend has occurred during the days leading up to the futures contract expiration, when institutional short-covering has led to session gains," she added.
The market "appears to have taken advantage of the expiry rallies to advantageously reinstate short positions. We note a consistent pattern this season of daily losses in the days following the futures contract expiration," Viswanath said. "With very little fundamental support on the horizon, we suspect that the market will continue to sell into price rallies until such time as a call on storage is required for heating demand."
"Prices are getting a boost from the front month roll," said Aaron Calder, senior market analyst at Gelber & Associates. The recent move higher "gives traders a new price point and changes the technical landscape somewhat."
The December contract traded Thursday in a range of $3.768-$3.838/MMBtu. The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).