Looking somewhat like a toddlers’ rollercoaster Wednesday, the April natural gas futures contract rode a number of small inclines and declines during the day, peaking at $5.475 and bottoming out at $5.380, but finishing the day at $5.429, down 10.1 cents from Tuesday.

“The contract really sold off all of the way through the overnight and basically chopped around here during the day session,” a Washington, DC-based broker said. “Gas has been taking its cue a lot from the crude market lately.”

He said that crude oil had a very interesting day Wednesday. The broker noted that the Crude Oil Report released Wednesday showed that U.S. crude inventories enjoyed a “huge jump” of 7.5 million barrels to 288.6 million barrels in the week ending March 19.

“[Natural gas] sold off 10 cents, which to my mind does not seem to be that much of a big move,” he said. “I still think we are within this range from $5.03 up to $5.77. In between this range, we have been moving back and forth a little bit. In our eyes, until you break through $5.77 on the upside or $5 on the downside, I don’t get real enthusiastic one way or another.”

Touching on the fact that answers to today’s natural gas supply question — such as new LNG terminals and alaskan gas — are still a number of years away, the broker said, “We currently have a fundamental bull case for prices and you could argue that we have entered a period of greater volatility. It appears there is a much higher floor for prices.”

Regarding the Energy Information Administration’s (EIA) storage report to be released Thursday morning, the broker said colder weather experienced last week should lead to a little bigger draw than the historical five-year average of 41 Bcf. However, he noted that he did not expect the news to sneak up on anybody and instill panic. “I don’t think higher withdrawal numbers will make people say, ‘Oh my gosh, we are over the five-year average!’ Everyone knows why with the cold snap last week. I don’t think it should threaten us all that much.”

Kyle Cooper of CitiGroup said his final estimation for this week’s EIA storage report was raised slightly after some more data was received. He is looking for a draw between 51 and 61 Bcf. This will compare against a build last year of 6 Bcf.

Meanwhile, Stephen Smith, of Stephen Smith Energy Associates, is looking for a storage withdrawal of 60 Bcf, noting that if his prediction held up it would represent 11 Bcf more than the normal seasonal draw of 49 Bcf, based on 1994-1998 norms.

After January and February started out the year cold, the storage surplus, which had been built up over the last nine months of 2003, had temporarily vanished by Feb. 27, 2004, said Smith. However, “the unusually warm weather of the first half of March rebuilt a surplus position of roughly 124 Bcf. This surplus storage position is in sharp contrast to the 300-400 Bcf storage deficit that existed at the same time last year.”

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