April natural gas futures in its first regular session action as the front-month contract on Thursday digested the morning news that 101 Bcf was withdrawn from underground storage last week with little more than a blip on the charts. Prompt-month futures failed to drop below the psychological $4 price level and ended up closing at $4.077, up 4.8 cents from Wednesday’s close.

After trading as high as $4.115 in pre-report trading on Thursday, the April contract knee-jerked to a low of $4.018 immediately after the number was released before rebounding minutes later.

“It was a weird day of trading in natural gas futures. We saw a storage withdrawal report that was actually pretty in-line with expectations,” said a Washington, DC-based broker. “Despite really no bullish fundamentals, April natural gas futures got pushed higher. I think the $4 price level has been a tough nut to crack. Most people are living or dying on that number. One interesting note is that some of my most bullish producers are finally starting to turn bearish, so that probably means we’re getting close to a low for the downward move. Producers are optimists by definition, so when they start to capitulate, it is probably the beginning of the end.”

While the 101 Bcf draw for the week ended Feb. 20 was close to industry expectations, a number of traders and analysts still deemed the report bearish.

“For the second week in a row, the storage withdrawals were at the low end of the range of expectations and well below the five-year average, 146 Bcf for this report,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “This suggests that the balance in the market remains weak, possibly on production that is still rising or a further step down in industrial offtake.”

Heading into the report most industry estimates were looking for a withdrawal of just more than 100 Bcf, a steep departure from the previous report’s 24 Bcf draw, but still less than historical comparisons. A Reuters survey of 22 industry players produced a 90-145 Bcf range of withdrawal estimates with the average pull expectation coming in at 108 Bcf. The actual 101 Bcf pull fell well short of last year’s 157 Bcf draw.

According to the Energy Information Administration, working gas in storage stood at 1,895 Bcf as of Feb. 20. Stocks are now 233 Bcf higher than last year at this time and 199 Bcf above the five-year average of 1,696 Bcf. The Producing region reverted to withdrawals for the week in question by pulling out 14 Bcf after it injected 16 Bcf one week prior. The East region removed 71 Bcf and the West region withdrew 16 Bcf.

Industrial demand for natural gas may continue to take further hits. The Thursday report by the Commerce Department showed January durable goods orders fell more than anticipated. Expectations were for a decline of 2.5%, a slight improvement over December’s minus 2.6% reading. The actual figure came in at minus 5.2% and reflects a worsening manufacturing sector.

Traders see no reason to abandon the short side of the market. “I’m still short,” said an Oklahoma City trader. However, he added that if spot futures were to settle above $4.500 he would “go neutral” and at $4.900 to $4.950 he would “go long.”

“You talk about a perfect chart from a trend perspective. There were a couple of little blips that would have gotten you out of a short position, but if you were a technical trader you would have gotten right back in,” he said. When asked about long-term support, the trader remarked, “There is nothing under the market except air. Just stay short.”

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