With the April futures contract terminating with a whimper instead of a wail, market-watchers were forced to turn their attention Monday to other things such as the current natural gas storage situation, including estimates for this week’s report. The April futures contract closed its doors for good Monday at $5.365, down only three cents on the day. Of more significance, the contract’s trading range for the session was incredibly tight at just 5.5 cents.

For Tom Saal of Commercial Brokerage in Miami, it was not the direction, but rather the diminutive size of the price move that was surprising Monday. “I thought we would see a little bit more downside momentum…There was a key pivot at $5.34 that the market was unable to get beneath [Monday],” he said.

Looking ahead, Saal maintains that the market still has a hefty premium built into it. “We have had back-to-back colder than normal winters. Now the concern is whether we will be able to fill storage like we did last year.”

However, Saal has yet to see anything to make him believe a bottom is in place and remains bearish. “Buyers might support this market on a move down to $5.10-15 or so…With the forward carry premium in this market right now, they will probably hold off on buying the summer strip,” he said,” noting that the prompt contract is a better bargain.

Kyle Cooper of Citigroup Global Markets Inc. also took notice of April’s quiet exit. “Natural gas prices fell as the April contract expired with little fanfare.”

Focusing on the country’s storage situation, Cooper said that Citigroup’s final estimation for this week’s EIA report looks for a withdrawal of between 23 and 33 Bcf. “Our estimate was revised lower as temperatures and pipeline data suggested a slightly smaller withdrawal,” he said. If realized, a number in that range would fall inline with EIA data showing a five-year average draw of 26 Bcf, while contrasting sharply with the 36 Bcf build last year.

He noted that a withdrawal in his estimated range would be considered “slightly supportive” from a temperature-adjusted standpoint. “It will clearly reduce the huge surplus to last year and may even drop the level below the three-year average.” Cooper added that it should also continue to expand the deficit to the five-year average. Looking ahead, however, the analyst warned that last year witnessed two draws with a rather large draw of 46 Bcf the second week in April.

Chiming in on the storage situation, Lehman Brothers’ Thomas Driscoll said he expects a storage withdrawal of 20 Bcf for the week ended 3/26/04. “Last week’s weather was warmer than normal across most of the nation,” he said. “Overall, last week’s weather was 9% warmer than the 30-year normal and 25% colder than last year.”

If Driscoll’s estimate holds up, the storage surplus versus a year ago will decrease from 372 Bcf to 316 Bcf and the storage variance versus five-year averages would increase from a 68 Bcf deficit to a 92 Bcf deficit.

Due to colder than expected weather and rounding, Driscoll said “We are trimming our end-of-season (March 31) storage estimate by 25 Bcf to 1,000 Bcf to reflect this week’s estimate. Over the last four weeks, withdrawals have averaged 5 Bcf per week stronger than expected. If this trend were to continue through the refill season, we could see some weakness in gas prices in the coming months.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.