After edging modestly higher in the 30 minutes following release of storage data showing a 208 Bcf withdrawal, the natural gas futures market kicked into overdrive at 11 a.m. Thursday as bulls made another attempt at the $6.00 mark. However, after notching a new all-time high in March futures and a new 23-month prompt contract top, the market slumped at the close, denying bulls their coveted $6.00 print yet again. March finished at $5.828, up 18.4 cents for the session but 8.2 cents off its new $5.91 peak.

According to the Energy Information Administration, working gas in storage was down 208 Bcf to 1,521 Bcf for the week ending Jan. 31. While this week’s drawdown fell short of the previous two weekly withdrawals of 247 Bcf and 219 Bcf, it easily surpassed the 78 Bcf comparison from a year ago, as well as the five-year average depletion of 111 Bcf. Versus expectations, the report was also on the bullish side since it fell in the top end of the 170-210 Bcf range of predictions. Stocks are now 811 Bcf less than at the same time last year and 287 Bcf below the five-year average.

After a sluggish 30 minutes of trading following the report in which the March contract only gained a nickel, the market rocketed higher between 11 a.m. and 11:30 a.m. EST. “This is the same type of price action that we have seen over the last two weeks,” commented George Leide of New York-based Rafferty Technical Research. “We are at higher levels than we were in January, but the market is behaving in much the same manner,” he said.

“The storage number was constructive, but the market appears to be taking it in stride. Until we settle above $5.70 on a weekly basis or $5.85 on a daily basis, you need to be a scale-up seller at these levels,” he assessed. On the downside, Leide points to the upward sloping trendline that currently provides support for the March contract at $5.56. A break lower would put the emphasis on the $5.47-50 level and then the $5.38-41 chart gap created by last Wednesday’s up move.

However, not everyone shares Leide’s outlook. Referring to the lack of non-commercial trader length in the market (less than 20,000 positions as of last Friday), Tim Evans of IFR Pegasus is cautiously bullish. “We don’t see that much speculative length here, limiting the volume of long liquidation that might feed a future decline. Prices may continue to shop sideways to higher here, rather than climbing consistently or selling off,” he wrote in a note to customers Thursday.

Evans continues by explaining that the market is in a sort of technical pickle, with its gains being limited by channel resistance on the daily chart. “The $5.91 high for the session suggests a line of rising resistance off the late January and early February highs, limiting access to the psychological resistance at $6.00 or higher values. So while the new highs are certainly not bearish here, we need to see stronger follow-through in order to really achieve escape velocity,” he added.

To put his money where his mouth is, Evans is currently long March from $5.72 with a sell stop at $5.62 to limit his risk.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.