Apparently unimpressed with the larger than expected storage withdrawal announced Thursday, the April natural gas futures contract dropped 9.3 cents on the day to close at $5.336. The consensus among market observers was that the 65 Bcf pull from storage surprised no one after the East experienced a widespread cold snap last week.

However, the withdrawal did beat most estimates, which were in the 39-61 Bcf range, while decimating the 6 Bcf withdrawal reported for the same week last year. Nevertheless, the storage announcement by the Energy Information Administration sent the April gas futures contact 14 cents lower to $5.29 in the first 10 minutes of trading following the release.

The East region, which showed a 68 Bcf withdrawal, was the odd man out as the Producing and West regions combined for a net 3 Bcf injection. The EIA reported that last week’s withdrawal left working gas in storage at 1,032 Bcf, or 372 Bcf higher than the same time last year and 92 Bcf below the five-year average of 1,124 Bcf. The government agency added that total working gas levels are currently within the five-year historical range.

“The storage report was meaningless,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “It is a foregone conclusion that we will have 1 Tcf in the ground at the end of the withdrawal cycle and that is more than we had last year at this time.”

Also acknowledging that the industry is likely to hit April 1 with 1 Tcf in storage, Ronald Barone of UBS said, “We view this approximate 1 Tcf level as moderately bearish when compared to 696 Bcf in 2003, but slightly bullish when compared to the prior 10-year average of 1,072 Bcf.” He noted that if the 1 Tcf level is reached by April 1, injections will need to be roughly 10 Bcf/d to get supplies to “a very solid comfort level of 3,150 Bcf by Nov. 1.”

Looking ahead, Kennedy believes the next price clues will come from the next round of long range forecasts. “The Farmers Almanac calls for an above-normal summer east of the Mississippi, but that has been out in the market since October… More important are the updated private forecasts set to be released in the next couple weeks.”

Coming out of the blocks with its three-month forward forecast, WSI Corp. said earlier in the week that it expects April to remain cool through most gas consuming regions, while May should be cool in the East, with warmer than normal weather across most of the West (see Daily GPI, March 23). The company said June should be cooler than normal along most of the U.S. coasts, while much of the country’s interior will be warmer than normal.

“We have established the upside with last week’s highs, now we are probing the downside,” said Kennedy. “At $5.50, the summer strip is not giving me warm and fuzzies quite yet if I am a buyer. We saw them jump into the market when it dropped down to $5.15. I am not so sure [buyers] will let it get that low before they step in to bid it up next time.”

Kennedy added that crude oil has some potential weakness in the short-run, and he suggested that could lead to some sympathy selling in natural gas. “Though I am not bearish just yet, I am starting to grow fur and claws,” he admitted.

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