A bearish storage report caused only a small “hitch in the git-along” for the futures market Thursday, as natural gas prices back-tracked for awhile and then shifted their focus to the oil market and surged ahead. While opinions remain mixed on the next price direction, it can be said that there are more bulls now than there were three weeks ago.

Prices initially tumbled lower after the morning announcement that a less-than-expected 96 Bcf was withdrawn from storage facilities last week. But that didn’t last.

By 1:30 p.m. EST the April contract had moved up 7.5 cents, an impressive 25 cents above its morning low. The prompt contract continued up to close out the session up 8.2 cents at $5.457. The rise in natural gas futures appeared to track those of April oil futures, which rose 84 cents to settle at $36.64 a barrel. The oil move came as the U.S. energy secretary told Congress the administration was “extremely concerned” about high gasoline prices.

According to the Energy Information Administration, storage stocks decreased 96 Bcf to 1,171 for the week ending Feb. 27. At first glance, the 96 Bcf withdrawal was undoubtedly bearish as it fell at the bottom of the 96-150 Bcf range of expectations. It also paled in comparison to the 109 Bcf five-year average and the 176 Bcf drawdown from a year ago.

But Lehman Brothers’ Tom Driscoll pointed out that the draw was healthy for a week in which weather was 5% warmer than normal. He noted that storage withdrawals after adjusting for weather, appear to be up by about 15 Bcf a week since mid-January, crediting lower prices with increasing demand.

George Leide of Rafferty Technical Research said the number was open to interpretation. “There is a tug-of-war going on out there. Sure it was smaller than expectations, but we are now set to come out of the withdrawal season below the five-year average.” Although it dropped slightly from a 163 Bcf peak a week ago, the deficit to the five-year average — at 149 Bcf — is difficult to overlook.

The technical outlook also is difficult to overlook, said Leide. “Technically, we did a number of good things on the charts last week…By holding above $5.00 and putting in the ‘V’ bottom, we set ourselves up for this week’s advances.”

Looking ahead, Leide is bullish, but notes that the market is currently stuck in a trading band. “In order to negate that band, we would have to break below $4.97.” On the upside, he continued, the band has resistance at the $5.90 area. “If I were a buyer, I would lock in half my load at current levels.”

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