With the natural gas storage report for the week ended March 18 revealing a relatively small 89 Bcf withdrawal, April natural gas futures traders took the bearish news and immediately probed lower, breaking through support at $7.05 within the first five minutes following the report.

Despite being able to get through the $7.05 level easily Thursday morning, the prompt month still found turbulence at the psychological $7 mark. However, just before 11 a.m. EST, April natural gas broke below it, reaching a $6.97 low in morning trade.

The stay below $7 proved short-lived as the prompt month rebounded almost immediately, trading within a range from $7.01 to $7.115 for the remainder of the session before settling at $7.062, down 7.6 cents on the day and 21.1 cents below the previous Friday’s settle.

“The report was kind of below expectations so you could call it somewhat bearish,” said Tom Saal of Commercial Brokerage Corp. in Miami. “Now the futures market is trying to work a little bit lower.”

Remarking on the morning dip below $7 and the subsequent recovery, Saal said market watchers had probably already seen what they were going to see for the day. “This day could be over [Thursday] morning because of the holiday Friday,” he said. “We will come in on Monday and see what happens, but I think the market wants to work lower.”

Saal said he expects the futures market to bounce around a little on Monday, which is the day options expire. “I think that for a while here we have been holding above $7, but now I think we have opened up the trap door,” Saal said. “Looking ahead, I think the market will weaken up as we move forward.”

Taking a jab at the theoretical link between natural gas and its liquid counterparts, Saal pointed out that natural gas went down on Thursday and crude and refined products were up. “I thought that was not supposed to happen,” he joked.

After coming off $3.65 in the previous two days, May crude earned $1.03 back on Thursday, settling at $54.84/bbl. While natural gas diverged from crude Thursday, April heating oil literally mirrored crude with a settle of $1.5484/gallon, up 1.48 cents.

With moderating temperatures and the arrival of spring, many said this storage report was significant because it represented the last chance of the season for a sizeable withdrawal. While the industry consensus centered on a 91-96 Bcf drop, there were some market experts looking for a pull as large as 118 Bcf. The ICAP-Nymex storage auction, which is normally close to the actual number, called for a 95.2 Bcf withdrawal. Coming in a little below most estimates, the withdrawal still blew away the five-year average withdrawal of 51 Bcf and last year’s pull for the week of 62 Bcf.

Working gas in storage now stands at 1,290 Bcf, according to Energy Information Administration estimates. Stocks are now 249 Bcf higher than last year at this time and 232 Bcf above the five-year average of 1,058 Bcf.

The East region removed 67 Bcf from underground storage for the week, while the Producing and West regions withdrew 20 Bcf and 2 Bcf, respectively.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.