Coming in on the high side of most industry estimates, the Energy Information Administration (EIA) confirmed Thursday morning that the nation's gas storage system did in fact return to withdrawals during the second week of April, removing 46 Bcf from underground stores due to a surprise cold snap in the East. However, it appeared that the number was already largely factored into the market as May natural gas futures traded a slim 13.5-cent range on the day before settling at $7.492, half of a penny lower than Wednesday's close.

After trading near $7.450 just prior to the 10:30 a.m. EDT report, the prompt month put in a $7.520 tick in the minutes that immediately followed the release. Just prior to 11 a.m., May natural gas was trading near $7.480.

Considering the recent price action and the fact that the May contract is currently trading right around $7.500, traders are now debating if the bulls have enough gas in the tank for another $8 run, or whether the bears, backed by mild temps and comfortable storage levels, will be able to continue probing toward $7 in search of support.

"While supportive relative to both consensus expectations and the 25 Bcf five-year average net injection, the market may still have difficulty sustaining a price recovery," said Tim Evans, an analyst with Citigroup in New York. "Given the mild temperature outlook, it won't be easy to snap the market out of its bearish funk."

Jay Levine, a broker with enerjay LLC, said that while the significant withdrawal was "impressive this late in the season," the "market was, for the most part, anticipating a draw of this size."

Rafferty Technical Research's Steve Blair said trading is still range-bound. "The cash market Thursday morning was once again a few cents above the price of near-month futures, so that could certainly be helping to keep futures from being pounded on to the downside. I have also heard that there may be a lot of commercial buying every time futures dip down. In addition, there is talk that we could see another withdrawal in the storage report next week," he said. "Putting all of that together, we could find ourselves in a similar situation that we found ourselves in during this week.

"The cash market is strong because utilities are buying cash gas and some of it is clearly not getting into storage, where as it normally would during this time. That said, I am really not bullish or bearish on this thing. I think we are once again caught in a big congestion area between the major support numbers down around $7 and the major resistance levels up at $8.03 to $8.05. I think we are still playing a congestion game of back and forth with little direction.

As for a strategy in the current market, Blair said noncommercial traders have to play the minor and major resistance and support numbers until they show that they have been broken through. "It's kind of hard to make a lot of money in a market that is ranging 10 cents a day," he said. "If speculation is your objective, there is not a whole lot you can do here. From the perspective of commercials, it really depends on what kind of hedging you have to do in the market. They really need to pick their spots in order to get their hedges on."

In addition to being supportive when compared to the five-year average injection, the 46 Bcf draw was bullish when measured against last year's 52 Bcf injection for the week. A Reuters survey of 20 estimates was expecting a 41 Bcf withdrawal to be revealed, while the ICAP storage options auction Wednesday afternoon was calling for a 35 Bcf withdrawal. Golden, CO-based Bentek Energy said its Flow model indicated a 29 Bcf withdrawal.

As of April 13, working gas in storage was 1,546 Bcf, according to EIA estimates. Stocks are 217 Bcf less than last year at this time and 280 Bcf above the five-year average of 1,266 Bcf. With the East running into surprise heating demand last week, the region led the withdrawal charge by pulling 43 Bcf from storage. The Producing region withdrew 6 Bcf while the West region injected 3 Bcf.

Traders might want to entertain the likelihood of another withdrawal for the week ended April 20. The National Weather Service (NWS) is again forecasting well above normal accumulations of heating degree days (HDD) for New England and the Mid-Atlantic. For the week ended April 21, the NWS reports New England will receive 155 HDD, or 25 more than normal, and New York, New Jersey and Pennsylvania will have to endure 151 HDD, or 41 more than normal.

Short-term traders are more attuned to a market at the low end of its trading range. "There was good scale-down buying in the $7.50 area Wednesday and selling takes place when prices reached $7.80, but no one is positioning themselves for a major trend at this point," said a New York floor trader.

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