March natural gas broke its streak of eight consecutive regular sessions lower on Thursday, testing the $7 level again before rallying higher to close at $7.134, up 6.8 cents on the day. The Energy Information Administration (EIA) reported Thursday that 102 Bcf was withdrawn from underground stores for the week ended Feb. 10. The number, which was closer to historical analogs than other recent weekly withdrawals, was still short of the industry’s expectations.

March natural gas dropped 13 cents to trade at $7.070 in the minutes immediately following the report’s 10:30 a.m. EST release and even cracked the $7 mark for a second consecutive session with a $6.980 tick at 1:30 p.m. The prompt month climbed from there to settle higher.

While the withdrawal was near expectations, overall levels in storage are at record highs for this time of year. As of Feb. 10, working gas in storage stood at 2,266 Bcf, according to EIA estimates. The only year that storage came close to that level was 2002, when 2,160 Bcf of working gas remained in storage following the second report of February.

“Like I said last week, I think that $6.950 level holds some significant support,” said Brad Florer, a broker with ICAP Energy. “What is interesting is that while the price level is holding, we are not bouncing. I would think that the market would do a little bouncing after coming off as much as it has over the past two months and going into a long weekend after eight straight down days, but it isn’t.”

Looking at the market Friday, Florer said there will probably be a little bit of short-covering. However, he warned that there is not much out there to spark the market higher.

“I think we come in next week on Tuesday, following the holiday, and we might be coming out of the recent cold snap, so I just can’t see what can get these guys fired-up about buying this stuff,” he said. “We are at historical storage levels and there is nothing on the chart to get people excited. Unless crude really bounces hard here, I don’t see what could give us any sort of a significant rally. We are clearly oversold and due for a technical bounce, but any strength put into this thing will be met with a lot of people selling into it.”

Some risk managers see an opportunity for end-users to lock-in favorable prices. “In the short run I think you have to consider buying here, and into the $6 area,” said George Ellis, vice president of the Bank of Montreal in New York. He added that in the short run, market psychology and emotions are likely to come into play. “We are moving out of a bearish winter, and we will move into the summer when hurricane fears will take center stage.”

Longer-term, Ellis questions what he sees as the market’s perception that current elevated prices are actually here to stay. “Whatever happened to market anomalies? I think we will look back at this period of high prices and say ‘that was an anomaly,'” he suggested.

He concedes that the direction of natural gas prices has been higher ever since the introduction of natural gas futures trading in April 1990, but “I don’t see a paradigm shift to higher prices. The market has a lot of work to do to sustain that,” he said.

“I don’t view $7 as cheap. Just because we have sold off to $7 doesn’t mean it’s a long term buy; $7 may be an eventual price ceiling when all the short-term supply issues have been resolved. We need to shake out another hurricane season before the market can get comfortable again,” he said.

As for the storage consensus for Thursday’s report, a Reuters survey of 19 industry players projected a withdrawal of 110 Bcf, while Wednesday afternoon’s ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, zeroed in on a 113.4 Bcf withdrawal for the week.

The 102 Bcf pull fell just short of last year’s 109 Bcf withdrawal and was well under the five-year average withdrawal of 144 Bcf.

Stocks were 444 Bcf higher than the same time last year and 691 Bcf above the five-year average of 1,575 Bcf. The East region led the way with a 70 Bcf withdrawal, while the Producing and West regions removed 21 Bcf and 11 Bcf, respectively.

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