After spiking to a new high for the week in the moments following the release of a larger-than-anticipated 85 Bcf storage withdrawal, the natural gas futures market went lower in the late morning and afternoon Thursday as sellers liquidated positions ahead of an expected weekend weather warm-up. April crested at $5.62 at 11:15, up 34 cents from Wednesday’s settle, but then tumbled back down to $5.17 by the middle of the afternoon. It closed at $5.306, up 2.8 cents for the session.

According to the Energy Information Administration, 85 Bcf was pulled from the ground during the week ending March 14, leaving a record-low supply of 636 Bcf. The previous low of 697 Bcf was set in April 1996. Also setting a record was the East Consuming region where a 64 Bcf withdrawal left only 267 Bcf, which is less than the April 1996 level of 285 Bcf. Working gas fell 14 Bcf in the Producing region to 197 Bcf, which is still 11 Bcf above the record low, and storage dropped 7 Bcf in the West to 172 Bcf, which is much higher than the 114 Bcf record low set on March 9, 2001. Total working gas levels are exactly 1,000 Bcf less than they were at the same time last year and 646 Bcf less than the five-year average.

Traders had been looking for a short covering rally for several days because the market has remained technically oversold since plummeting to the low $5s from $10.10 on Feb. 25. The storage situation was expected to be the trigger mechanism.

“On the upside, I’m still looking for a bounce…back into the $5.60s, up to $5.75,” said Jay Levine of Advest Inc. in a note to customers Thursday morning. “Above that, $6, $6.25 [and then] $6.50, the latter being a significant hurdle.”

As it turns out, the market was able to etch a print in the lower end of his $5.60-75 target range before turning lower in the afternoon. Traders agreed that moderating weather forecasts for the weekend were responsible for stifling the rally.

After experiencing cold and rainy conditions Thursday, the weather in the Northeast corner of the country is expected to clear up and warm up this weekend, prompting buyers of physical supplies to back off their daily requirements beginning gas day Friday. Looking further ahead, the temperature forecast is a mixed bag. According to the National Weather Service’s latest six- to 10-day forecast released Thursday, the end of March will see above-normal temperatures from New England south down the East Coast and west to the Gulf Coast of Texas. Meanwhile, the NWS predicts below-normal temperatures for a large swath of the Central Plains and Rockies.

Also of potential concern for the gas traders is the long-lead outlook released by the government, which calls for a hot start to the summer cooling season. According to the latest 90-day outlook from the National Oceanic and Atmospheric Administration, above normal temperatures are expected to dominate the western half of the nation.

In daily technicals, April has support at the $5.08-16 level, which corresponds to lows notched last Friday and yesterday respectively. On the upside, resistance is seen at the aforementioned $5.60-75 level that thwarted Thursday’s rally.

©Copyright 2003 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.