April natural gas was mostly quiet Wednesday as traders assessed the market’s next move. After making a mini-run higher in morning trade to hit a $6.880 high, the prompt-month contract receded from that point and bounced within a range from $6.690 to the mid-$6.80s for the remainder of the session, ultimately closing at $6.733, up 1.9 cents on the day.

While the greater weather picture along with robust storage levels continue to paint a bearish picture for natural gas futures, erratic behavior in April crude continues to play an influential role on the complex. April crude settled 56 cents higher Wednesday at $61.97/bbl. March crude was as low as $57.55/bbl as recently as Feb. 16.

IFR Energy Services analyst Tim Evans said it seems that natural gas traders are making their latest attempt at picking a bottom. “Natural gas has staged another rally attempt, and has been turned back again,” said Evans. “It needs to get through $7.00 to have better success in correcting higher in our view. We’re 100% short April natural gas from $7.07 with a protective buy stop now lowered to $7.02 to limit our risk on the trade.”

Broker Jay Levine of enerjay LLC also said the market is continuing its struggle to find a bottom. “While I sense the vast majority of the energy trading public is still pretty bearish — and fundamentally speaking, they have every right to be — I’m not.”

Levine said he sees crude heading towards $70+, which leaves the direction of natural gas as the only question. “Well, the fundamentals are blindingly negative — thanks to exceptionally mild weather conditions and plenty of gas to go around — but don’t be so blinded that you don’t see the potential for a resurgence,” he said. “If my predictions over in crude et al are correct (and obviously there’s always the possibility they’re not), it’s unlikely that natural gas won’t go along for some part of that ride, never mind that the spread between the two are once again [way] out of whack.”

Levine said he still views the $6.75 to $6.80 area as his first pivot/resistance point, and if the screen could muster strength beyond that, he would then look for resistance at $7.30, $7.80 and then $8.50. “While any bounce is likely to be met with serious skepticism, I would leave room — and keep an open mind about it — for a rapid short squeeze, even if that proves to be short-lived,” he said. “The point being, I’d stay loose about any resistance points and likely aim high.” As for support levels, the broker said he sees $6.55 to $6.50 first, followed by $6.25 and $6.

In Tuesday’s trading, price action took no prisoners as even the supposedly savvy local traders suffered losses. April natural gas finished at $6.714 that day. “The locals are confused. They were selling us a ton of (April) $6.69s and then just a few seconds later it was $6.73 bid at $6.74 and these guys are buying $6.73s and $6.74s back from us. They got slaughtered,” a fund broker said.

Top analysts look for a continuation of the trend lower. “This is a market looking for excuses to sell off even further, and any bearish interpretation to the heating oil stats [released Wednesday] could easily ignite another price decline to new lows,” said Jim Ritterbusch of Ritterbusch and Associates prior to Wednesday’s trade. He believes that as low as natural gas prices are, it “is still difficult to build a bullish case for this market on fundamental merits given the huge supply surplus and virtual completion of the heavy usage period.” About the only supportive market factor is the technically oversold condition of the market and the fact that additional price improvement might be necessary to attract additional selling. The “line of least resistance is still leaning heavily in favor of even lower values,” he said.

National Weather Service figures show that for the four weeks of February the U.S. had 697 heating degree days (HDD), or 52 fewer than normal. Although the total is below normal, reflecting a warmer than average February, it was far colder than January, which accumulated only 662 HDD, or a whopping 255 below normal.

Looking at Thursday morning’s natural gas storage report for the week ended Feb. 24, IFR Energy Services’ Evans said some traders expect that lower natural gas prices have resulted in an industrial demand rebound in recent days. He said this belief has some calling for a hefty 150 Bcf withdrawal — although he is not buying it. “We’re sticking with our weather-based estimate of 130 Bcf…rather than bank on the anecdotal reports,” he said.

According to a Reuters survey of 22 industry players, U.S. natural gas storage levels are expected to fall by about 154 Bcf. Wednesday afternoon’s ICAP-Nymex storage options auction went one step further. The auction, which runs from 3-4 p.m. EST on Wednesday, is calling for a 160 Bcf withdrawal.

Golden, CO-based Bentek Energy said storage withdrawals are expected to increase for the third week in a row, resulting in stocks below the 2 Tcf mark. The company projects a storage withdrawal of 151 Bcf, resulting in 1,992 Bcf of gas in storage. “This level is 49.6% above the five-year average and 3.6% above the five-year high,” the company said.

According to the Energy Information Administration (EIA), 104 Bcf was withdrawn last year at this time and the five-year average for the week is 118 Bcf.

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