Natural gas futures finished on a sour note Wednesday as tradersalleviated overbought conditions and took profits both before andafter the release of fresh storage data. After opening lower, theApril contract worked its way down throughout much of the sessionbefore tumbling at the closing bell to finish at $2.71. The promptmonth’s 8.9-cent decline was trumped only by the May contract,which dropped 9 cents to finish as $2.747. Estimated volume wasmodest with only 63,810 contracts changing hands.

The big news of the day came shortly after 2 p.m. (EST) with therelease of the latest storage inventory data. According to theAmerican Gas Association, 29 Bcf was withdrawn from undergroundstorage facilities last week, depleting stocks to 1,165 Bcf or 36%full. Working storage levels are 428 Bcf less than last year atthis time and 61 Bcf more than the six-year average. However, formany sources , it wasn’t comparisons with prior years that wereworrisome, but rather the way yesterday’s drawdown compared tomarket expectations. “Any way you slice [the storage report], itsbearish,” quipped a Chicago trader. “Expectations were centered ona 50 Bcf withdrawal. This didn’t even come close.”

One of the main components analysts look at when trying topredict the storage figure is degree day tallies put out by theNational Weather Service which show how much below (heating day) orabove (cooling day) the mean temperature was with respect to a 65degree base. The NWS reported the U.S. averaged 130 degree dayslast week, an average temperature of about 47 degrees.Comparatively, the week prior averaged 120 degree days or atemperature of about 48 degrees. It was this comparison of degreedays that led many market watchers to estimate that this week’s AGAreport would show a withdrawal closer to last week’s 74 Bcf number.

However, factors other than the weather were at work, and nonewas as poignant than the skyrocketing summer and 12-month strip,which Tim Evans of New York-based Pegasus Econometric Group blamedblames for the low storage withdrawal. “Since the heating degreedays for last week were consistent with a higher figure, thissuggests a conscious effort to conserve storage now rather thanrisk having to replace it later in the year at a higher cost.”

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