Natural gas futures values spiraled lower Thursday after the 266 Bcf natural gas storage withdrawal for the week ending Jan. 8 failed to set a new all-time single-week record. While the number still came in above most industry estimates, it appeared that some traders were holding out for a decline of more than 274 Bcf, which was recorded for the week ending Jan. 25, 2008 and stands as the single-week record.

Even with the Energy Information Administration (EIA) recording a revision Thursday morning that boosted withdrawals by 5 Bcf for the week ending Jan. 1, bulls were unable to get any positive traction. Heading into the 10:30 a.m. EST report, February natural gas futures were trading at $5.709. In the minutes that immediately followed, the prompt-month contract dropped to $5.510 and recorded the day’s low of $5.483 just after noon EST. The February contract went on to close out the regular session at $5.588, down 14.5 cents from Wednesday’s close.

One New York broker noted that traders were likely responding to the passing of a “major” event. “Traders had this report on their radar for some time because everyone was expecting it to reveal a really large decline in working gas levels,” he told NGI. “However, no one knew just how big it would turn out to be, so traders were frozen until the report. Now that the number is out…and out of the way, people can put this report in the rearview mirror and focus on other fundamentals, such as the impending warm-up, which is obviously bearish.”

Citi Futures Perspective analyst Tim Evans, who had been expecting a 195 Bcf pull, deemed the actual 266 Bcf draw as “larger than expected,” even when compared to industry surveys. However, the analyst hypothesized that futures values slumped on the number due to the forecasted weather ahead.

“The 266 Bcf net withdrawal was larger than expected, although still within the range of expectations, which had extended up to 280 Bcf,” Evans said. “The data also included a downward revision of 5 Bcf for the prior week. The draw was also quite bullish compared with the extremely low 76 Bcf five-year average comparison figure. However, given that the temperatures over the next two weeks will run warmer than normal, the market can now look ahead to lower heating demand and smaller storage withdrawals. The coldest temperatures of the winter are arguably now behind the market. And what doesn’t spike the price, in this context, can make the market weaker.”

Going into the report a Reuters survey of 27 industry players produced a withdrawal range of 195 Bcf to 280 Bcf with an average call of 256 Bcf. Bentek Energy had been looking for a 275 Bcf withdrawal. From a heating standpoint the logic was compelling for a record pull in the report. The National Weather Service shows that for the week ended Jan. 26, 2008 the U.S. aggregated 250 heating degree days (HDD) and for the week ended Jan. 9, 2010 the tally reached 256 HDD.

Due to the resubmission of data from one or more respondents, the EIA said in Thursday’s report that revisions for the week ending Jan. 1 lowered working gas volumes from 3,123 Bcf to 3,118 Bcf. As a result, the implied net withdrawal for the week ending Jan. 1 changed from 153 Bcf to 158 Bcf, effectively making for an overall decline of 271 Bcf Thursday morning.

As of Jan. 8, working gas in storage stood at 2,852 Bcf, according to EIA estimates. As the 266 Bcf draw blew away both the 87 Bcf date-adjusted pull recorded last year for the similar week and the five-year average draw of 76 Bcf, current stocks shrunk to only 103 Bcf higher than last year at this time and 121 Bcf above the five-year average of 2,731 Bcf.

The East Region withdrew 146 Bcf while the West Region withdrew 20 Bcf. According to Bentek, the Producing Region’s 100 Bcf draw for the week set a new record. The region’s previous high draw of 81 Bcf was posted during the week ending Jan. 25, 2008.

Trading observers attributed much of Wednesday’s 14.2-cent gain to $5.733 as preparation for Thursday’s report. “Short-covering was most definitely the factor in play [Wednesday]. If you are short and you see how the market bounced off that [$5.432] low, you are going to say, ‘there’s a number coming out; why take the risk?'” John Woods, senior trader at MacNamara Options LLC, said Thursday morning.

In the near term weather bulls are going to have to put up with expectations of warmer temperatures. Commodity Weather Group of Bethesda, MD, said “widespread impressive warming” can be expected to “dominate” the next 10 days but California is anticipated to see stormy and cool weather.

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