May natural gas futures continued their slide as traders reported no interest by commercial players and seemed resigned to the ongoing slump. Expectations are for a withdrawal in Thursday’s inventory report, but that is seen as little help to the bullish cause. At the end of the day May had retreated another 8.5 cents to $4.146 and June had given up 8.4 cents to $4.220. May crude oil continued its run higher, adding 49 cents to $108.83/bbl.

Short-term traders reported quiet trading. “A few days ago we were looking for the market to break the $4.50 level. It got pretty close but never made it,” said a New York floor trader. “It’s looking like a pretty bearish run here and we are looking at a [inventory] number of a 54 to 58 Bcf withdrawal, and the last two reports were builds, so maybe that will push prices higher.”

He added there was no commercial interest and not much driving this market higher. “There is no one with any inclination to do any scale-in buying,” he said. When asked if a government shutdown would have any implications for trading, he said, “Not at all. It’s completely out of the market.”

At the Federal Energy Regulatory Commission (FERC), however, personnel are preparing to operate in an essential operations-only scenario.

In the event of a government shutdown, a number of people in FERC’s reliability and market monitoring offices are likely to be designated as essential employees, “and there would be some level of continuing oversight,” FERC Chairman Jon Wellinghoff told reporters in Washington, DC, Wednesday. “It certainly wouldn’t be to the level or extent that we’re capable of with a full staff, but to the extent that those are essential functions, there will be personnel there” (see related story).

Industry consultant Bentek Energy released data showing expectations of Thursday’s inventory report for the week ending April 1. Utilizing its North American flow model the firm calculated a withdrawal of 58 Bcf with overall stocks down to 37.4% this week, down 1.5% from the previous week. “For this sample, the U.S. is 74.6 Bcf below the same week last year when storage utilization was 40.2%. Currently, 20 out of the 36 storage facilities…have inventories below levels at the same time last year,” the firm reported.

Bentek said the April 1 report is anticipated to be the last withdrawal of the season and forecasts that the East Region will see a withdrawal of 51 Bcf, the Producing Region a pull of 8 Bcf, and the West a build of 1 Bcf.

Estimates are closely bunched. IAF Advisors of Houston predicts a pull of 53 Bcf and Tim Evans of Citi Futures Perspective in New York is looking for a decrease of 58 Bcf. These will be compared to last year’s 29 Bcf build and a five-year average increase of 13 Bcf.

The recent sell-off has lowered May futures more than 24 cents over the last four sessions, but in earlier times a market adjustment would have been far more severe, according to analysts. The fact that prices seem to be just easing lower may be revealing.

“We believe that a number of funds have stopped selling this market even though it seems equally apparent that some funds are still at it. Events in Japan have combined with President Obama’s avowed interest in solving the nation’s energy imbalance to change the ’tilt’ of the market’s ‘playing field,'” said Peter Beutel, president of Connecticut-based Cameron Hanover. “Selling seems to be getting less mileage on the downside, and that is a major shift, at least over the last few days, in this market.”

Although most will say at this late stage of the heating season or the early injection season that weather has been fully discounted, “rising temperature readings at the forecast horizon are the major cause for selling here. We are also seeing producer hedging at the higher levels as those traders look to lock in better selling levels,” said Beutel. “For all practical purposes, the winter heating season has come to an end. We may get a surprising report here or there, but we are headed into injection season and underground storage levels can be expected to increase in the weeks ahead — it’s strictly a calendar thing.

“We still see room for prices to work lower over the near term, but any surprising final burst of cold air or bullish figures this or next Thursday could give us swift rallies. This is a market that should sell off for all the right reasons — but it is also a market that seems to have finished its long-standing trend lower. Surprises are on the upside,” he said in a morning note to clients.

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