Natural gas futures continue to appear comfortable at their current price level as the April contract quietly went off the board Wednesday at $7.233, up 1.9 cents on the day. Likewise, May natural gas futures, which now take on prompt-month status, closed on Wednesday at $7.456, up 7.2 cents.

Trading on Wednesday had the potential to be pretty interesting. In addition to it being the April contract's expiration, the day also gave traders the chance to jockey for position ahead of Thursday morning's storage report. Withdrawal estimates have varied widely.

"I think we saw some book squaring on the expiration...compounded with book squaring ahead of the storage report," said Tim Evans, an analyst with IFR Energy Services. "We are at a price level here that is really comparable on the May contract to where we closed on Thursday and Friday, so it is kind of an interesting level we have come back to here."

Evans said while there is some chance that the market will see a bullish storage number, the report will probably be the market's last hurrah. "Whatever upside reaction we get off the report is going to be a sale, because we know that it is warmer this week and next week is expected to bring more of the same," Evans told NGI. "There is not much in the short-term outlook that is going to result in any kind of sustained advance."

Evans is calling for a 70 Bcf withdrawal in the Energy Information Administration's (EIA) storage report Thursday for the week ended March 24. However, he said the withdrawal has the potential to be much greater. "We have been going through this erratic pattern where it is almost like there is a 5-6 Bcf/d consumer who is in the market one week and not the next week," Evans explained. "If that consumer was back in the market last week, we could see a withdrawal number more like 110 Bcf." However, he added there is the potential that this could be the last withdrawal of the season.

Market technicians see the current price movement of natural gas futures as part of a longer-term seasonal advance. Walter Zimmerman of United Energy says the rangebound trading from Friday, when April futures posted a high of $7.49 and subsequently retreated, is part of "a bull market correction in a continued seasonal advance."

He added that holders of short positions are growing increasingly frustrated by the market's inability to work lower and this will support the market. "What the bears really need is a nose-dive in gasoline that drags No. 2 oil down with it. Do not expect that to happen," he said. There is not a case for a sharp decline, and "the real issue is whether natgas continues the glacially slow pace of the recent advance or accelerates higher. There have been too many bottoming indications over the last few weeks of trading," he suggested.

Other traders aren't ready to call for a market turn higher. "When the June contract sees an $8 handle, that's my signal that the market has [already] bottomed," said a California trader.

Adding to the uncertainty over Thursday's storage report, a Reuters survey of 19 industry players showed that withdrawal estimates ranged "widely" from 65 Bcf to 115 Bcf, with an average expectation of an 84 Bcf withdrawal.

Golden, CO-based Bentek Energy projects a storage withdrawal of 95 Bcf, resulting in 1,714 Bcf of gas in storage. However, the consulting firm said that based on its "analysis of the relationship between total demand and storage injections/withdrawals, our 95 Bcf storage-based withdrawal projection could be lower by as much as 11 Bcf, or -84 Bcf."

Bentek said it projects that working gas levels as of Thursday's EIA report will be 62.6% above the five-year average and 11% above the five-year high. The company added that its U.S. supply/demand data for this EIA measurement week indicates a 9.1% increase in demand over the previous week.

Bentek's projection for Thursday's storage report came close to the result of the ICAP-Nymex storage options auction, which is calling for a 96.9 Bcf withdrawal. The storage number revealed Thursday morning will be compared to last year's 56 Bcf withdrawal and the five-year average pull of 30 Bcf.

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