After posting a 25-cent rally Thursday, the natural gas futures market cooled its jets Friday as almost equal amounts of profit-taking and commercial buying entered the trading pit. At the close the sellers had exerted a little more influence, resulting in a 4.7-cent decline and $5.596 settlement in the prompt April contract.

The weakness was more profound in the summer strip, which continued to experience greater price volatility than the prompt month by dropping 5.4 cents to average $5.713 Friday afternoon.

In addition to profit-taking, the residual impact of the undeniably bearish storage report released Thursday was cited as a price depressant Friday. According to the Energy Information Administration, 28 Bcf was pulled from the ground for the week ending March 5. Not only was the withdrawal bearish versus consensus expectations in the 37-42 Bcf range, but the 28 Bcf take away also paled in comparison to the year-ago and five-year average draws of 102 Bcf and 75 Bcf, respectively. At 1,143 Bcf storage is now 407 Bcf above the year ago level and 103 Bcf below the five-year average.

“There is no question it was a bearish number,” said Ed Kennedy of Miami-based Commercial Brokerage Corp. “It is now possible that the market will enter the injection season with more than 1 Tcf in the ground.”

For Kennedy, however, that is just about the extent of the bearish news. Looking ahead, he cites summer heat and bullish technicals as factors that could propel the market past the $6.00 level. “Regardless of the chart you are using, [technicals] confirmed a bottom when gas traded above $5.60 Thursday. You’ve got to forget what you believe and believe what you see…Look for a test of the $6.00 level.”

Less quantifiable but equally compelling is the idea that non-commercial traders covered shorts during the 5% price hike Thursday. Looking at Thursday’s estimated volume of 80,220, there is very little doubt that funds were big buyers, Kennedy continued. And though the Commodity Futures Trading Commission released weekly Commitments of Traders data Friday showing that non-commercials had trimmed their net short positions to 11,466, Kennedy notes that Thursday’s price action will not be reflected in the data until the report released this coming Friday.

In the meantime, the market will naturally turn to discussion on the size of the next storage report to be released Thursday. Citing forecasts suggesting that last week would tally 140 total degree days (heating degree days plus cooling degree days), Dallas-based Southwest Securities makes an early call for a 60 Bcf storage withdrawal. If realized, a number of that magnitude would fall slightly short of the year-ago and five-year average withdrawals of 82 and 81 Bcf respectively.

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