April natural gas futures declined in active inventory-report driven trading Thursday. Short-term traders were quick to cite the end of winter as the near-term market driver and discounted the release of inventory data by the Energy Information Administration (EIA). Longer term, analysts suggest that the market has limited downside potential. At the close April futures fell 9.2 cents to $4.767 and May slid 9.6 cents to $4.831. April crude oil shed $1.83 to $78.17/bbl.

The EIA weekly gas inventory report was right in the cross-hairs of trader expectations calling for withdrawals to put stocks below average levels. The report showed that inventories for the week ended Feb.19 fell by 172 Bcf, almost exactly equal to industry estimates. A Bloomberg survey had estimated a 169 Bcf draw, as did Reuters. Industry consultant Bentek Energy missed by 1 Bcf at 171 Bcf. The hefty draw pulled inventories down to 1,853 Bcf, below last year’s level of 1,909 Bcf and not far above the five-year average of 1,840 Bcf.

The day’s activity left little opportunity for short-term traders. “The market didn’t do anything. It went up 10 cents, then down 10 cents, and the market just whipsawed. No one makes money in that kind of market,” said John Woods, a senior trader at McNamara Options in New York. “The market is going lower. The target is $4.60 and then you bounce back from there. Winter is over, and I would sell rallies off of $4.60.”

Those with a longer-term focus have a somewhat tempered bearish outlook. “It’s been an awful cold winter, and the market can’t even hold $5, but that being said, prices are pretty darn low,” said a marketing manager with a California utility. He added that “from my perspective the lower prices and the reduced volatility give the market some allure.

“I look for the market to work lower, but I don’t know if it is sustainable. My sense is that the market is going to turn around and head north, but I just don’t know when. Near term the market looks really vulnerable and I was surprised to see it fall over 55 cents this last week. It’s been cold out east and the market seems to want to trend just one way.”

Others are also a touch apprehensive about the downtrend lasting much longer. “The bottom line is that I can’t see how the [price] trend lower is going to last all that long,” said Peter Beutel, president of Connecticut-based Cameron Hanover. He noted that the 172 Bcf withdrawal put storage at a small deficit to year-ago levels but at a slight surplus to five-year averages.

He expects another cold snap “because once these weather patterns form a trend, they are likely to persist. I don’t think there is that much chance that we are going to see warmer or normal weather last for a long time. I think it’s more likely that you are going to see the colder weather come back and we will get some smaller draws, but I think we will end the season with ending inventories close to where we have been in previous years,” he told NGI.

Weather bulls have a hefty winter storm to buttress their case. An intense eastern storm is expected to dump snow in Pennsylvania and southern New York. “The zone from northwestern New Jersey and the Poconos in northeastern Pennsylvania to the Catskills of New York and a strip across upstate New York, spanning Syracuse, will get buried by one to two feet of snow. The Green and White mountains in New England will also get one to two feet of snow,” said Meghan Evans, an AccuWeather.com meteorologist. She added that moderate to heavy amounts of snow, totaling six to 12 inches, will fall across a wider area of the Northeast, including the West Virginia mountains, northeastern Ohio, a good part of Pennsylvania, New Jersey, New York and northern New England. Philadelphia and New York City lie in this zone.

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