Capping off a topsy-turvy holiday-shortened week of natural gas futures trading, the April contract attempted to work lower Thursday morning before being propped up by a fairly supportive 85 Bcf storage withdrawal report. The prompt-month contract put in a low of $8.700 before settling at the $9.065 high on the day, up 4.1 cents from Wednesday, but 81.3 cents lower than the previous week’s finish.

After recording the $8.700 low, futures traders were forced to reevaluate their positions after the Energy Information Administration (EIA) reported that 85 Bcf was withdrawn from storage for the week ended March 14. While the number was well within industry expectations, it was much larger than historical comparisons and further contracted the year-over-five-year average surplus.

Traders kept Wednesday’s downward momentum Thursday morning to record the $8.700 low as of 9:20 a.m. EST, but the prompt-month contract crept up to $8.940 in anticipation of the significant withdrawal.

Citigroup analyst Tim Evans was not too impressed with the storage number. “The report was supportive compared with the 57 Bcf five-year average draw, but was only slightly above expectations and may not spark that much of a price response,” he said. The 85 Bcf draw was also much larger than last year’s date-adjusted 21 Bcf pull.

For its part, May crude futures took another beating on Thursday, albeit a smaller one in comparison to recent sessions. In its first session as front-month contract, May crude dropped 70 cents to close at $101.84/bbl.

“I think we are seeing a mass liquidation in all of the major commodity markets. It looks like these funds are going for liquidity in a big way,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “I have been warning people, the one thing commodity markets can’t handle is a majority opinion. If everyone is bullish, watch out because you know what happens when you load up a boat on only one side.

“We saw a little bit of a bounce following the report, but we will have to see what happens. I still think there might be some further pressure to the downside. Below Thursday morning’s $8.700, the mid- to low $8.30s is the next target on the way down.”

Recent blasts of cold air in eastern and Midwest energy markets have caused storage operators to dig into supplies. Prior to the report, a Reuters survey of 20 industry players had been eyeing a withdrawal range of 63 Bcf to 94 Bcf with an average withdrawal expectation of 80 Bcf.

As of March 14, working gas in storage stood at 1,313 Bcf, according to EIA estimates. Stocks are now 215 Bcf less than last year at this time and only 29 Bcf above the five-year average of 1,284 Bcf. The East region and the Producing regions withdrew 66 Bcf and 22 Bcf, respectively, while the West region actually recorded a 3 Bcf injection.

As the week started off with Wall Street fears sparked by the meltdown at Bear Stearns, many natural gas traders seemed more willing to take their trading cues from broader financial markets than the fundamentals surrounding natural gas.

Going into Thursday’s session, some traders surmised that April futures were able to remain perched above the $9 psychological support level because sellers ran out of bullets. “No one wanted to be the first to stick his foot in the pool [sell below $9],” said one trader.

Headed into Thursday’s action, the trader noted that the session would be critical to price direction. “As long as the market stays below $9.190, I think it will continue lower,” he said. “If it gets above $9.190, it will head to $9.250 and all bets are off.”

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