March natural gas futures managed a modest gain Wednesday as other markets soared or sank in response to turbulence in oil-rich Libya and the greater Middle East. Analysts noted that the situation is far different than the recent upheaval in Egypt as Libya is a major exporter of crude oil and by most accounts the petroleum markets are going to have to factor in the loss of about 1.5 million b/d, as companies evacuate personnel from the country.

April crude oil touched $100 late in the session before settling up $2.68 to $98.10/bbl. February gold futures rose $13.40 to $1,414/ounce and the Dow Jones Industrial Average fell 107 points to 12,105.

On the other hand March natural gas rose 3.3 cents to $3.900 and April added 2.9 cents to $3.936.

Short term traders lamented that "every other market is up big, and natural gas can't get out of its own way," said a New York floor trader. He added that it was the day for options expiration and futures did stage a modest late-session rally, but "the market is stuck in this range, but it looks to me like it still wants to go lower. The market has been sitting here between $3.85 and $3.93, and if it doesn't get the withdrawal number it is looking for tomorrow, it will probably test $3.60."

For the moment, if not the remainder of the withdrawal season, 200 Bcf reductions in natural gas inventories are done. Thursday's estimated withdrawal by most accounts falls well below the triple-digit threshold. The five-year average withdrawal for this time of year stands at 148 Bcf and the one year date-adjusted pull stands at 174 Bcf.

Last week's stout pull of 233 Bcf put inventories 141 Bcf below last year and 128 Bcf less than the five-year average, but that is likely to change with Thursday's report. Citi Futures Perspective analyst Tim Evans is looking for a withdrawal of 67 Bcf and Ritterbusch and Associates expects a 90 Bcf pull. Bentek Energy utilizing its North American flow model forecasts a reduction of 81 Bcf.

In its report Bentek expects the 81 Bcf draw to come from the East, 57 Bcf; the Producing Region, 11 Bcf; and the West Region, 13 Bcf. It noted that the 81 Bcf withdrawal "would bring U.S. storage inventories down to 1,830 Bcf. This level is 289 Bcf below the five-year high, 48 Bcf below the year-ago inventory and 61 Bcf below the five-year average."

The firm also said, "During the past 10 consecutive weeks, the EIA has reported three-digit draws for the Lower 48 states and most likely a large draw won't be seen until the next withdrawal season. This first two-digit draw of 2011 is occurring three weeks earlier than the past two years when withdrawals in the U.S. have remained strong through the first week of March. A few more draws will occur in the weeks to follow but most market players would agree that the withdrawal season is mostly over."

Consistent with the withdrawal season being largely finished, weather forecasters are showing upcoming cold incursions limited to points far removed from populous eastern and Midwest energy markets.

"Below- and much-below-normal temperatures are forecast along the West Coast and over most of the northern tier of the country," WSI Corp. of Andover, MA, predicts in its 11- to 15-day forecast. "Near- and above-normal readings are now expected to encompass most locations south and east of the Ohio Valley." It added that Wednesday's forecast is "warmer over most locations south and east of Chicago than it was [Tuesday].

"Temperatures may continue to trend warmer over the southeastern U.S. than currently forecast. While the Pacific Oscillations (PNA, EPO and WPO) are forecast to be in favorable phases, the medium-range models continue to depict a positive NAO [North Atlantic Oscillation] in early March."

Market technicians see the market working another 30 cents lower. "Unless the bulls can stage [an] immediate rally Wednesday, we would fully expect the downtrend to continue," said Walter Zimmerman of United Energy-ICAP. "[Their] next objective in this case: a large cluster of wave count targets and ratio retracements stretching from $3.568 to $3.362." At that point they will be studying their data "intently to see if a drop to this area will be able to generate RSI divergence on the intraday and/or the daily charts."

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