Finishing the week with a sub-$7 handle, April natural gas futures traded a slim 9.5-cent range Friday before finishing the week at $6.924, down 3.5 cents on the day and 15.9 cents lower than the previous Friday's close.

After settling below $7 during the first two sessions of the week, Wednesday's 19.1-cent rally was the lone bright spot for market bulls before Thursday and Friday's drops to finish the week. Despite the chill impacting the Northeast and Mid-Atlantic, which was expected to continue through the weekend, market watchers see a slow price grind lower until the summer picture becomes a little clearer.

"We haven't had quite the roller-coaster that we have seen in crude and gasoline futures, but there was a little bit of movement in natural gas during the week," said Tim Evans, an analyst with Citigroup in New York. "I attribute the rally back on Wednesday to a little bit of 'buy the rumor, sell the fact' with regards to the 115 Bcf storage withdrawal. The withdrawal was well within expectations. The rally also coincided with the cold coming into the Northeast."

Evans noted that trading on Friday was quiet, not only in the front month. "The whole week was relatively tight in the May futures contract," he told NGI. "Our low for the week -- including the overnight sessions -- was $7, while the high for the week was $7.272. When was the last time you had a 27-cent range on the week in any month, let alone in the prime nearby contracts? It's really been quiet here."

Without any real news out there, the analyst said he sees things winding lower in the near term. "I am expecting the market to grind lower, especially since it is expected to be slightly warmer than average this [coming] week and likely the following week," he said. "In addition, the withdrawal season is almost over and it is pretty much understood that we will end the season around 1.4 Tcf. However, on the other side of the coin, the 'urgent reason to buy' seems to be that it might be hot in June or that we might have some storm activity in the Gulf of Mexico during the third week of July, so basically there really is no reason to buy in the third week of March against those summer events. I can't forecast when those events become a broader interest for the market.

"From a price perspective, we are hanging around the lowest price level since January. That implicitly means that everybody who was buying during February and the first half of March is out of the money. Some of those people may have sold their positions, but not all of them. I would think the bears would be feeling more comfortable at this point compared to what the bulls are going through. That said, I'm not a big bear here. If it's the story of Goldilocks, I am the baby bear. Could May futures drop 30-50 cents from here? Yes, they could, but we are not headed to $4. There is nothing catastrophically bearish here. We have less gas in storage than a year ago, so we are in trimmer shape there. We also have these longer-term forecasts for summer heat and hurricanes, which also doesn't lend the bears much support. In terms of the big picture, the downside is relatively limited and so I don't anticipate aggressive selling. I think we will quietly chop around for a little bit and make a new low here or there until we get some more supportive news nearby. Then we turn higher again."

Energy Information Administration (EIA) inventory figures proved right on the money Thursday. The EIA reported a withdrawal of 115 Bcf, in line with industry expectations in the 110-120 Bcf range. When the report was released it was greeted with a thunderous yawn, but that allowed traders to adjust positions without interference from a potentially market-moving event like the supply report. "Funds were able to move short positions around without having to deal with any market response to the withdrawal number," observed a New York floor trader.

Traders see a complex market with little immediate indications of the short-term market direction. Traders observed Thursday that funds and managed accounts were realigning positions to accommodate a bearish posture albeit farther out on the price curve. The seasonal April-May and October-November spreads, as well as others, both widened Thursday, indicating a tendency to slide short positions to more deferred contacts.

"People were moving positions around to accommodate a more bearish posture. We saw a lot of selling in the April contract and that was offset by buying in the May," the floor trader said. He suggested that with the spreads going into deeper contango, "It's just a sign that (short) money is being moved farther out along the curve."

Weather bulls may have one last ace up their sleeve in the form of cold weather forecast for major energy markets early this week. MDA EarthSat on Friday predicted that Washington, DC, and Philadelphia will both see low temperatures below seasonal norms. For the three- to five-day period Philadelphia's low is expected to reach 30, which is four degrees below normal and Washington, DC's low of 27 is also four degrees off a normal seasonal pace.

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