The Energy Information Administration’s (EIA) report Thursday morning that 12 Bcf was withdrawn from underground storage for the week ended Aug. 4 did little to spur natural gas futures higher as the withdrawal was thought to have already been factored into the market. The expected withdrawal along with overall weakness in the petroleum trading pits allowed September natural gas to close at $7.529, down 12.2 cents from Wednesday.

The report marked the second withdrawal recorded this summer, which is an anomaly. However, natural gas futures barely rippled. Just prior to the 10:30 a.m. EDT report, September natural gas futures were trading at $7.700. Immediately following the report, the prompt month shot to a high of $7.900, but quickly came off, recording a morning low of $7.460 as of 10:38 a.m.

The real news on the day came from the petroleum trading pits, where unleaded gasoline and crude oil futures tumbled following the news that Britain had thwarted a terrorist plot to blow-up trans-Atlantic airliners en route to the United States. September crude dropped $2.35 to close at $74/bbl, while unleaded gasoline took an even larger plunge by dropping 18.33 cents to close at $1.9889/gallon, an 8.4% decline from Wednesday’s $2.1722/gallon close.

Market watchers are concerned that renewed terrorism fears could scare consumers, dampening petroleum demand and ultimately affecting the economy negatively. The news was exactly what petroleum markets needed to back off lofty price levels, which were sparked earlier in the week by BP’s Alaska oil pipeline difficulties.

“Although the foiled terror attack in Britain has shocked the market into questioning its demand assumptions, the U.S. gasoline market remains the anchor that is pulling the rest of the market down,” said Tim Evans, an analyst with Citigroup.

With the petroleum markets taking center stage, natural gas futures and the storage report were only a side show Thursday.

“Even though the ICAP auction revealed a 5 Bcf withdrawal, I guess the market was looking for an even larger pull. The natural gas futures price was set for something larger,” said Tom Saal, a broker with Commercial Brokerage Corp. “You also have to remember that this is presumably the last withdrawal for a while as the heat has moderated this week. Now that this one is over with, the market is probably thinking that we’ll go back to regular seasonal injections. The market is always looking forward.”

As for resistance and support, Saal said the $8 level is psychological resistance. “I think $8 remains a large hurdle,” he said. “Looking at a chart, we haven’t taken out a prior high yet, which is a lot higher than $8. This market — at least on this move — hasn’t proven anything to be super bullish about. On the support side, I would say probably down around $7.385, which we almost got to in morning trade [Thursday]. The support and resistance areas remain huge due to the increased volatility in this market.”

The withdrawal from storage was the result of extreme heat and resultant electrical generation demand for the first week of August. According to National Weather Service (NWS) figures, New York, New Jersey and Pennsylvania experienced 101 cooling degree days (CDD) or 42 more than normal, and the populous midwestern states of Ohio, Indiana, Michigan, Illinois and Wisconsin suffered through 97 CDD, or 41 more than normal. For the year it has been hotter than normal. NWS figures show the Mid-Atlantic states have recorded 577 CDD, or 148 more than normal, and the Midwest states have endured 555 CDD, or 72 more than normal.

Going into Thursday’s session, market technicians had suspected that Wednesday’s 49.3-cent gain in the September contract would be hard to duplicate. “We noted earlier that of the recent decline from $8.619 to $6.760, the $7.910 to $8.220 zone is where one would expect a bear market correction to peak and reverse lower,” said Walter Zimmerman of United Energy. He noted that Wednesday’s high at $7.940 touched the lower edge of this resistance zone.

The withdrawal was bigger than the industry expected. A Reuters survey of 19 industry players was calling for a 1 Bcf withdrawal for the week, while Golden, CO-based Bentek Energy said it expected to see a 5 Bcf withdrawal. However, Bentek did make good on its prediction that the East region would record its first-ever summer withdrawal due to the significant natural gas demand for gas-fired power plants. The EIA reported Thursday that the East region withdrew 1 Bcf from underground stores, while the Producing region withdrew 18 Bcf and the West region injected 7 Bcf.

The actual 12 Bcf withdrawal pales in comparison to last year’s 42 Bcf injection and the five-year average build of 61 Bcf. As of Aug. 4, working gas in storage stood at 2,763 Bcf, according to EIA estimates. Stocks are 306 Bcf higher than last year at this time and 374 Bcf above the five-year average of 2,389 Bcf.

Trading activity remains feverish. The New York Mercantile Exchange Inc. said Thursday that its natural gas futures contract set a record Wednesday when open interest reached 948,193 contracts, exceeding the previous record of 944,677 contracts set Aug. 8.

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