The Energy Information Administration (EIA) reported Thursday morning that 179 Bcf was withdrawn from underground natural gas storage for the week ended Jan. 19. Although the withdrawal was slightly larger than most industry expectations, it already appeared to be priced into natural gas futures, as the February contract sank following the report, recording a low of $6.860 before settling at $6.905, down a whopping 51.6 cents from Wednesday’s close.

Following the report, which was released a few minutes after its normal 10:30 a.m. EST schedule, the prompt month dropped to $7.130 by 10:41 a.m. from $7.260. After breaking below the psychological $7 level just after 11 a.m., the prompt month staged an ill-fated rally before heading lower once again for good. Crude futures also dropped significantly. The March crude contract recorded a low on Thursday of $54.10/bbl before settling at $54.23/bbl, down $1.14 on the day.

“Everyone expected such a big storage withdrawal number earlier in the week ands so when they got it, there was really no surprise,” said Eric Bolling, a veteran local trader on the Nymex floor. “The market really didn’t have much left other than the momentum from the morning, which was down. When crude failed during the day, it was pile-on selling in gas. There were a couple of big players looking at the front-to-back spread on Thursday. I think they were putting some bearish pressure on, which probably had a lot to do with the price drop.”

As for keeping up with the constantly changing weather forecasts, Bolling told NGI he relies more on the feel of the market during times of weather forecast chaos. “I am so tired of the weather forecasts changing and people hanging their hats on every last forecast. Trading is getting so choppy and volatile as a result,” he said. “I find that it is better to go in and feel the market out, then make a judgment on things other than who’s coming out with the latest weather report and what is it saying. Other than that, there is not a whole lot going on in the natural gas pit.”

Despite the price action Thursday morning, Citigroup analyst Tim Evans said he sees the withdrawal as supportive to the futures market. “The 179 Bcf net withdrawal is on the high side of some estimates,” he said. “It should give the market some support. Among other things, it affirms the base level of demand for the bigger withdrawals that should follow over the next two weeks.”

A New York-based broker said he thought the withdrawal was a little small next to expectations. “We actually saw storage withdrawal estimates from 185-189 Bcf, so we actually saw the report as slightly bearish,” he said. “It looked like the market might hang in there a little bit after stalling around $7.220 to $7.230, but it ended up dumping. It tested $7, bounced back a little bit, but then traders just whacked it at the end of the day. We had pretty significant support down around $6.950, but we settled below there, which is a bullish sign.”

Traders got an early jump on the number sending February futures on a four-day climb beginning Jan. 18, which took February futures higher by $1.363 or 21.9% to $7.597 when the dust settled at Tuesday’s settlement. By Wednesday traders were wondering if perhaps the market had come too far too fast. February futures slid 17.6 cents to $7.421.

“There are high expectations put into the EIA withdrawal number, and that is why the market is struggling on rallies,” said a New York floor trader Wednesday. He added that the market went up late last week and early this week on cold weather and a little help from crude oil, but “I just don’t see the gains as sustainable. A lot of the shorts have been cleaned out and there is just not a lot of buying power left.”

Nonetheless, the market-driving cold air is expected to stick around. AccuWeather forecasts that the high in Philadelphia next Wednesday should reach 35 degrees, four degrees lower than normal. Cincinnati, OH, is predicted to see a Wednesday high of just 30, or nine degrees below normal.

With the significant drop in temperatures across much of the country last week, traders were well prepared for a stout withdrawal. A Bloomberg survey of 19 analysts showed a median estimate of 171 Bcf. At Fimat, experts expected a draw of 181 Bcf. Strategic Energy and Economic Research was anticipating a 174 Bcf drop, and the consensus withdrawal revealed by the ICAP derivatives auction was 174 Bcf as well.

As of Jan. 19, working gas in storage stood at 2,757 Bcf, according to EIA estimates. Stocks were 251 Bcf higher than the same time last year and 472 Bcf above the five-year average of 2,285 Bcf. The East region removed 75 Bcf from underground stores while the Producing and West regions withdrew 61 Bcf and 43 Bcf, respectively.

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