After plunging lower Thursday morning to temporarily threaten the psychological $7 level following the Energy Information Administration's (EIA) 132 Bcf storage withdrawal report, April natural gas rebounded later in the session to settle at $7.288, down 1.2 cents from Wednesday.

Despite coming in just below industry estimates that were mostly calling for a draw in the high-130s to low-140s, the 132 Bcf withdrawal for the week ended Feb. 23 was a steep departure from the last three week's of 200-plus Bcf pulls. In the minutes prior to the 10:30 a.m. EST release, April natural gas was trading at $7.195. Immediately following the number's release, the prompt month put in a $7.100 low before running into support and rebounding. The contract put in a high on the day of $7.340 just before the session came to a close.

"Even though the withdrawal was slightly smaller than expected, nothing has changed for natural gas futures," said Ed Kennedy, a broker with Commercial Brokerage in Miami. "We are in a range between $7 and $8...and that's it. We get below $7.200 and the buyers come in, while when we venture above $7.750, the selling soon follows."

Kennedy noted that the reason the market is stuck within this range is because "what we know will affect the market are the very same things that we don't know the outcome of yet. We don't know how far we are going to draw down storage by the end of the withdrawal season and we don't know what the weather is going to be like for spring. If it turns out to be chamber of commerce weather with very little demand, then prices are going to go lower. If it turns out to be much above normal, creating early air-conditioning demand, that would pull the market in the other direction. There is really no reason for this thing to move unless we get something earth shaking. We are in this range and we are going to stay in this range for the meantime."

Kennedy noted that early weather and hurricane outlooks could support a bullish case. "AccuWeather issued a preliminary forecast that called for an above-normal temperature spring and a much above-normal summer," the broker said. "We also have received the preliminary Atlantic hurricane season forecast from William Gray of Colorado State University. He is calling for a very active season. That's fine, we had an active season last year, but none of them hit land or damaged the Gulf of Mexico. On the other hand, we had one hurricane in 1992, his name was Andrew. So don't tell me about active or not, just tell me where they are going to go."

Looking at the risk in the market, Kennedy said the upside appears more vulnerable. "Going back to January 2006, we are building a huge base in futures," he said. "I would have to categorize it to the hedgers that we have more risk to the upside than to the downside. However, we would need to take out the resistance, which I don't see happening anytime soon. March is a funny month. We will get two days of below-normal temperatures followed by two days of above-normal readings, that's just the way March is."

Jay Levine, a broker with enerjay LLC, said that while storage isn't ending the season "quite as comfortably as previously imagined," the current storage situation "isn't the issue as much as future storage, and future uncertainty, and that should be enough to prevent a major slide in prices, much less the complex."

Levine added that the current slide in global equity markets should continue to be monitored "since any hiccup in global demand -- even the perception of such -- could be enough to dampen any buying enthusiasm, potentially adding fuel to any sell-off, but I think the jury is still out how this all shakes out and last I looked energy prices are still holding up quite well with nothing historically cheap about $61.70 crude and $7.17 natural gas and I seriously doubt global demand is heading in any other direction than up...overall and long-term. Besides, something, other than existing fundamentals, is holding us up and part of that stems from fear and fear premiums -- justified or not -- and always will."

He noted that a 132 Bcf withdrawal "falls a touch on the low-side of expectations" and with global markets "still in a tizzy," there's no reason to think that energy prices won't follow suit. Levine added that while he remains cautiously bullish overall, he is still open to downdrafts and sell-offs.

A Reuters survey of 22 estimates had been looking for a 143 Bcf pull. The Wednesday afternoon ICAP storage options auction produced a consensus withdrawal estimate of 141 Bcf. Golden, CO-based Bentek Energy's Flow Model indicated a withdrawal of 138 Bcf. The actual 132 Bcf draw came in well below last year's 165 Bcf pull and just above the five-year average withdrawal of 129 Bcf.

Natural gas futures trading this week has been a one-way street lower, with April dropping 51.8 cents in four trading sessions. Wednesday "at mid-morning Citigroup, Paribas and others came in and sold the April contract. That drove the market lower and there was no buying interest to lift prices," noted a New York floor trader. He added that it "was like a wet blanket had been thrown on the market." Often after a protracted period of selling, locals or other short-term traders will attempt to capitalize on a market bounce, however brief, in the opposite direction. Not this time. "The locals started [Wednesday] buying the market, but when Paribas and others started selling they just got out of the way."

Weather forecasts give a slight edge to the bears. AccuWeather in its six- to 10-day forecast shows a large area of above-normal temperatures defined by a broad arc extending from central California to Minnesota to southwest Texas. South and west of this arc is expected to be above normal, but New England, northern New Jersey, northern Pennsylvania, New York and small portions of the Pacific Northwest are forecast to be below normal.

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