The natural gas futures market backed itself down against key support levels Thursday morning as traders failed to take advantage of the release of a seemingly price-supportive storage withdrawal figure (195 Bcf). And although the March contract was able to muster a modest upturn in the afternoon, the bears remain focused on downside targets at $5.55, $5.48 and $5.20.

March finished at $5.659, down 8.1 cents on its first day as prompt contract at Nymex. At 38,370, estimated volume was extremely low for the session.

According to the Energy Information Administration, 195 Bcf was withdrawn from storage last week, dropping domestic inventory levels to 2,063 Bcf as of Jan. 23. Although the drawdown paled in comparison to the 247 Bcf takeaway seen during the same week last year, it easily exceeded the five-year average withdrawal of 165 Bcf. Storage now stands 334 Bcf more than year-ago levels and 163 Bcf more than the five-year average.

While the report could be viewed as somewhat mixed versus historical data, it was undeniably bullish versus market expectations. “Our average estimate was for a 175 Bcf draw,” said George Leide of New York-based Rafferty Technical Research, which polls clients and customers on storage expectations each week. “[195 Bcf] is sure one heck of a bullish number.”

The market’s reaction, however, was anything but bullish, he noted. “We got a minor blip up and then it was right back down to support in the mid $5.50s.”

Leide explained that the bullish storage data came during a time in which the market has turned very negative from a technical perspective. “We failed to fill in the $5.90-96 chart gap that exists between Friday’s low and Wednesday’s high,” he said. “Unless or until we trade through that area, this market remains negative.” Accordingly, he targets support at $5.55, $5.48 and $5.20. These price levels are potential nets to catch the market should it fall. On the upside, a break above $6.15 would be required for Leide to begin to shed his bear coat.

Thomas Driscoll of Lehman Brothers in New York said the withdrawal exceeded his prediction of 185 Bcf and the 156 Bcf figure of the previous week. However, Driscoll said if he had based his estimate using storage withdrawal behavior versus heating degree days for the entire winter season to date, he would have estimated a 193 Bcf withdrawal. He said it appears as if market-watchers and analysts have adjusted their withdrawal expectations downward following the smallish draws of the last couple of weeks. Based purely on the degree-day forecasts for this week (U.S. average of 208), Driscoll’s early estimate for next week’s storage report is a 150-160 Bcf draw.

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