Still reeling from the bludgeoning Thursday tied to a round of bearish natural gas supply news, the natural gas futures market continued to sink closer to the $3.810 low for the larger downtrend. June futures recorded a low of $3.885 before closing at $3.920 Friday, down 6 cents from Thursday’s finish and 42.3 cents below the previous week’s close.

Market watchers sighed a collective breath of relief Friday as the market no longer had the Energy Information Administration (EIA) 914 report production revisions looming over its every move. The downward revisions to production data for January 2010 and all of 2009, which were revealed Thursday, proved to be smaller than industry expectations (see Daily GPI, April 30a; April 30b).

“The EIA production revisions turned out to be ‘much ado about nothing,'” said Steve Blair, a broker with Rafferty Technical Research in New York. “The market reacted bearishly to the 83 Bcf injection storage report and when the revisions came out it headed even a bit lower. The weakness continued into Friday. We’re back to sub-$4, but I would have liked to see it close just a bit lower. A close below $3.914 would have been below the low for the June contract. While we were close, it now makes me a little wary. We could see a bounce.”

That said, Blair believes the bears are sitting pretty comfortably. “We no longer have this 914 production report revision hanging over our head, so I’ll be interested to see if there will be a continuation of the downward pattern in prices,” he told NGI. “We’ve got some major support prices around $3.860 and $3.810. If we get below those, we’ve got a ways to go before we reach any more support numbers. In the immediate term, I do think the $3.810 low for the months-long down move is definitely back in play.”

After analyzing the EIA’s production revisions, Credit Suisse analyst Teri Viswanath said her team is convinced that domestic natural gas production is rising. “Surprise, U.S. natural gas production was not grossly overstated,” she said in a research note. “As we anticipated, the actual downward revisions were relatively modest. The largest monthly revision for the Lower 48 occurred for December 2009, which was lowered by 0.81 Bcf/d, while the average monthly gross production for all of 2009 was lowered by just 0.34 Bcf/d. More importantly, the most recent data for February 2010 actually reflects a 1 Bcf/d m-o-m [month-over-month] increase based on the newly revised data.”

Following Thursday’s 36.8-cent drop, some traders generally believe the market overdid it a bit. “We viewed the downside price response as an overreaction, and we will be looking for some price consolidation for a few days at around the $4 mark per nearby June futures. We still look for this support to provide a base for a gradual upside price recovery of as much as 10% during the month of May,” said Jim Ritterbusch of Ritterbusch and Associates.

Ritterbusch noted that there is an apparent contradiction in the natural gas market similar to that in the petroleum complex with short-term bearish fundamentals at odds with longer-term bullish considerations. Thus the front end of the curve remains vulnerable, but the more deferred contracts continued to be supported by expectations of stronger long-term demand. “From a trading perspective, we look for support in nearby futures at around the $4 mark and we would view a $3 handle as a longer-term buying opportunity,” he said.

Economy watchers were generally satisfied with the 8:30 a.m. EDT Friday release of first quarter gross domestic product data by the Commerce Department. Prior to the release of the figures, trader expectations were for a 3.4% annual growth rate for the first quarter. The actual figure came in at a somewhat lower 3.2%, well below the fourth quarter’s 5.6% growth rate but showing continuing economic growth nonetheless.

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