March natural gas futures treaded water Wednesday in anticipation of Thursday's release of government figures showing a withdrawal that would place inventories below last year and five-year averages. At the closing bell March futures had risen four-tenths of a cent to $4.044 and April futures added 1.1 cents to $4.083. March crude oil fell 23 cents to $86.71/bbl.

"The market has been lingering here between $4 and $4.05, and it looks like it wants to go a bit lower," said a New York floor trader. He added that with the storage pull coming out Thursday "we [could] trade down to $3.86 before it is all said and done. It looks like the range on the report is a withdrawal from 190 to 205 Bcf."

Traders noted that on many occasions whether the injection/withdrawal number came in above or below expectations was less important than the fact that traders used the number as a trading event and prices would typically follow the near-term trend. "We have come off of highs of $4.70 or so just over a week ago and the market feels like it wants to go still lower. I have the sense that traders are willing to let the market fall, and there is no great amount of buy orders under the market willing to take advantage of lower prices. There may be some buying on the way down, but it still feels there are a number of sellers out there," the trader said.

Analysts are predicting a withdrawal figure in the 200 Bcf area for Thursday's weekly Energy Information Administration [EIA] inventory report, and heating requirements data suggest that next week is likely to be nearly as stout. A Reuters poll of 28 industry players revealed an average expectation of 202 Bcf with a range of 175 to 227 Bcf for the week ended Feb. 4. Kyle Cooper of IAF Advisors is looking for a pull of 192 Bcf, and Ritterbusch and Associates expects a decline of 202 Bcf also. These will make a dent in the current balance relative to last year and the five-year average. One year ago 180 Bcf was withdrawn, and the five-year average stands at 159 Bcf.

Figures from the National Weather Service (NWS) show that heating degree day (HDD) accumulations for this week are likely to be just as robust as those for the week ended Feb. 5. NWS reported that for the week ended Feb. 5, 908 HDD were tallied for New England, the Mid-Atlantic and the Midwest from Ohio to Wisconsin. For the week ended Feb. 12 NWS forecasts a tally of 893 HDD for the same regions.

Bears hoping for a plunge below $4 may have to wait for Thursday's inventory report, but market technicians point out that spot futures could trade another 15 cents lower and from a wave-count perspective still maintain an uptrend.

"Ideal support for the March contract is $4.061-3.997 (0.7862 and 0.852 of $3.854-4.823)," said Brian LaRose, an analyst with United-ICAP. "The lowest level consistent with a bull market correction in the March contract is $3.854 (previous contract low). Ideal support for the spot continuation contract is $3.869-3.849 (0.618 of $3.212-4.879 and (A)=(C)). Fail to turn higher this week and a test of the $3.212 low will be expected."

Looking out to the 11- to 15-day period, natural gas weather bulls may be able to find some optimism in recent forecasts. WSI Corp. of Andover, MA, said, "Below- and much-below-normal temperatures are forecast over the western U.S. and the northern Plains. Above-normal readings are expected to encompass Texas and the southeastern U.S. [Wednesday's] forecast is not as warm over the south-central U.S. as it was yesterday.

"The risk...may be shifting to the colder side in the Northeast. While the models advertise the La Nina-like negative PNA pattern developing over North America next week will continue in late February, they all also advertise the NAO will transition to a negative phase."

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