In a typical display of its ability to shrug off undeniably bullish information, natural gas futures turned lower Wednesday afternoon following the announcement that a whopping 156 Bcf was pulled from underground storage facilities last week. After surpassing its Jan. 17 high of $2.38 to reach a new 5-week high at $2.41, the March contract plummeted 16.5 cents in 25 minutes to finish at $2.245, down 6 cents for the session.
According to the American Gas Association, 44 Bcf and 15 Bcf were withdrawn from the Producing Region and the Consuming Region West respectively, with the Consuming Region East accounting for the remaining 97 Bcf. The 156 Bcf net decrease was bullish, not only because it easily eclipsed both last year’s 95 Bcf withdraw and last week’s 82 Bcf takeaway, but also because it exceeded the common range of expectations in the 120-150 Bcf area.
At 2,056 Bcf, storage now stands 1,015 Bcf above year ago levels, down slightly from last week’s surplus of 1,076 Bcf, and more than 100 Bcf off the peak surplus of 1,127 Bcf reached during the last week of December. Versus the five-year average, storage is currently at a 620 Bcf overhang. Last Wednesday the release of a paltry 82 Bcf withdrawal spawned an unlikely buying push that took the March contract on a five-day, 35-cent rally off the $2.03 low notched that afternoon.
However, bullish storage was not only reason traders were in disbelief of yesterday’s late decline. Also constructive for natural gas prices were comments made by President Bush relating to a possible military campaign against Iraq. Crude oil wasted little time in reacting to Bush’s statements, as traders bid up the March contract to an intraday high of $21.75 a barrel, its highest level since Jan. 8. March closed at $21.18, a 45-cent gain for the session.
While bull traders were pointing to price-constructive storage figures and increasing uncertainty in the Middle East, bear traders continued to hang their hats on mild weather forecasts. According to the latest six- to 10-day forecast released Wednesday by the National Weather Service, above normal temperatures are expected across a large swath of the country from the Rocky Mountains eastward. Normal temperatures are forecast in the Southeast and Southwest with the Pacific Northwest constituting the sole region of the country with the potential for below-normal mercury readings.
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