After digesting the Energy Information Administration's (EIA) natural gas storage report revealing that 102 Bcf had been withdrawn for the week ended March 2, natural gas futures traders on Thursday ultimately set their sights on lower prices, bringing the April contract to a low of $7.150 before settling at $7.239, down 12.7 cents on the day.

After trading at $7.190 just prior to the report's 10:30 a.m. EST release, the prompt month rallied in the minutes that immediately followed. However, after topping out at $7.250 immediately following the report, April natural gas dropped to record a low of $7.150 just after 11 a.m. EST. The contract rallied again late in the afternoon to put in the day's high at $7.260 before closing. Whether futures can get below support near $7.100 remains to be seen.

"The response to the number was little; we had that little pop higher but it came right back down," said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami. "While there was not much of a rally, the report was friendly to the market. However, we really are still pinned in this $7-8 trading range. The two things that are going to decide the gas demand schedule for the spring are how far are we going to draw down storage before we start injecting and what kind of weather we are going to see going into spring.

"We are already below last year's storage level, and with this surprise cold snap this week, which was not forecast by the National Weather Service, we are likely to get another big draw next week. When it is 20-25 degrees below normal, traders tend to pay attention," Kennedy said. "While it is 17 degrees in New York Thursday, we are supposed to get a warm-up into the 40s and 50s by Sunday, with warmth continuing through to the middle of next week. However, some of the independent forecasters are warning of another cold blast going into next weekend. While nobody is reacting to that below-normal forecast for the end of next week, if they are still forecasting that by Tuesday, watch out, because we could start responding to it. It seems reasonable that the storage report for the week ended March 9 could be another big withdrawal, but if we get a bonus big withdrawal for the next week then things will really get interesting in terms of season-ending storage levels."

Jay Levine, a broker with enerjay LLC, classified the 102 Bcf pull as "just what the market was expecting, even if it's inconclusive." He added that with winter transitioning to spring and summer, there are a lot of loose ends that need to be resolved. "The market's going to be talking about the usual suspects -- end of winter, end of storage withdrawals, start of forecasts for summer, technical and psychological signs, yadda, yadda, yadda -- and I'd just as soon hold off with any grandiose plans, for now, preferring to wait for better signs on direction and/or price targets," he said.

Antsy traders weren't excited about the prospects of a storage report that showed supplies tucked well within seasonal norms. They are chomping at the bit for something to move natural gas futures out of the doldrums. "We have been in a trading range for three months and haven't gotten out of it," said a New York floor trader. "It looks like that is not going to change anytime soon," he added.

Seasonal analysts like to point to the natural gas market's tendency to make broad seasonal moves, generating gains for traders on the right side of the price trend, but the current trading range is thwarting that strategy. "An average preseason rally would take spot natural gas futures up to $8.90, which is only $1.50, but the trading range is 85 cents," said Walter Zimmerman of United Energy.

With those kind of trading parameters in place, more than half of any potential advance from current prices is covered by the current trading range, and as a trading vehicle natural gas may be under stiff competition from other trending markets. "Do I want to take a chance on going long natural gas or go to one of the markets that are actually trending?" queried Zimmerman.

Going into trading Thursday, others were already long. "We're long April natural gas from approximately $7.20 with a stop loss order at $7.01," said Phil Flynn of Alaron in Chicago.

One week after falling below the 200 Bcf withdrawal level, some within the industry expected the report to reveal a sub-100 Bcf pull. A Reuters survey of 22 industry players hit the report on the dot. The survey produced a range of expectations from 94 Bcf to 124 Bcf and a median drawdown estimate of 102 Bcf. Bentek Energy's Flow Model methodology indicated a withdrawal of 96 Bcf. The withdrawal came in just above last year's 97 Bcf withdrawal for the week and a bit under the five-year average pull of 117 Bcf.

With four reports left to go in the traditional withdrawal season, the 1,631 Bcf left in storage as of last Friday is 65 Bcf below the 1,696 Bcf level reached at the end of the 2006 withdrawal season on March 31. However, by looking at other statistics, storage levels could still be quite comfortable when all is said and done. According to the EIA, the five-year average finish to the withdrawal season sits at 1,232 Bcf, while the minimum amount of gas in storage at the end of a withdrawal season over the last five years sits at 694 Bcf, which was recorded in 2003.

As of March 2, stocks are 268 Bcf less than last year at this time and 194 Bcf above the five-year average of 1,437 Bcf. The East region withdrew 78 Bcf for the week while the West region pulled 18 Bcf and the Producing region removed 6 Bcf.

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