Natural gas futures bulls were dealt another blow Thursday morning as the Energy Information Administration (EIA) reported that only 159 Bcf was withdrawn for the week ended Feb. 6. Immediately following the report, the March natural gas contract scouted lower prices and ended up closing at $4.485, down 4.7 cents from Wednesday’s finish.

Just prior to the 10:30 a.m. EST Thursday report, the prompt-month contract was trading at $4.515. In the minutes that immediately followed, the contract fell to $4.380.

Citi Futures Perspective analyst Tim Evans said the somewhat “bearish” storage number was important at face value, but was much more valuable for what it likely says about future reports. “The 159 Bcf net withdrawal for last week was at the low end of the range of expectations and under the 166 Bcf five-year average benchmark,” he said. “This boosts the year-on-five-year average surplus to 24 Bcf. Given that the next two reports were also forecast to feature below average injections, this report basically gives permission for the market to test the downside.”

Going into the report, a Reuters survey of 22 industry players produced an estimated range of withdrawals from 154 Bcf to 181 Bcf with an average pull expectation of 166 Bcf. Bentek Energy’s flow model indicated a withdrawal of 169 Bcf. The actual 159 Bcf pull was still larger than the 143 Bcf that was removed last year for the week, but it was smaller than the 166 Bcf five-year average withdrawal.

As of Feb. 6, working gas in storage stood at 2,020 Bcf, according to EIA estimates. Stocks are now 44 Bcf higher than last year at this time. The East region withdrew 115 Bcf while the Producing and West regions removed 37 Bcf and 7 Bcf, respectively.

“I was surprised that the West’s withdrawal was so low compared to last week, especially since it was still cold out there,” said Tom Saal, a broker with Hencorp Becstone Futures LC in Miami. “The West pulled 20 Bcf for the week ended Jan. 30, but only 7 Bcf for the week ended Feb. 6. I think that is what made the overall number smaller than most people in the industry expected. As a result we are testing the downside. The $4.280 low for the move from Feb. 2 is still intact, but I think we will eventually test it. I don’t think it is safe in this environment.”

With winter winding down, the concern is there are not a lot of weeks left to draw down gas supplies. The conventional wisdom is that once residential heating requirements begin to ease, the lack of industrial demand prompted by the recession is likely to swell inventories and put further pressure on prices. While the National Weather Service (NWS) counted a greater-than-normal accumulation of heating degree days (HDD) for the week ended Feb. 7, the agency predicts that the week ending Feb. 14 will tell a different story. From New England as far west as Wisconsin, 59 HDD more than normal were tallied for the week ended Feb. 7, but NWS predicts that 243 fewer than normal HDD will be recorded for the same stretch of the country for the week ended Feb. 14.

The U.S. economy received an unexpected sign of life Thursday as the 8:30 a.m. EST Thursday release of January retail sales data by the Commerce Department actually showed growth. Prior to the release of the data expectations were for a decline of 0.8% as shown in a Bloomberg poll, far less than the stout 2.7% decline posted in December. The actual figure, however, was an unexpected gain of 1%.

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