April natural gas futures on Thursday — in its first regular session action as the front month contract — soared higher as the year-on-five-year average storage surplus contracted and crude futures notched another all-time high. The prompt-month natural gas futures contract jumped 38.3 cents on the day to close at $9.443, despite a storage withdrawal report that was well within expectations.

The Energy Information Administration (EIA) reported Thursday morning that 151 Bcf was withdrawn from underground natural gas storage for the week ended Feb. 22. After trading higher overnight to open Thursday’s regular session at $9.210, the prompt-month contract pushed up to $9.250 just prior to the 10:30 a.m. EST report. Following the storage number, the contract continued higher from there.

The strength in nearby crude futures certainly did not hurt the move in natural gas prices. April crude, buoyed by the weakening U.S. dollar, the promise of lower interest rates and fresh Nigerian production concerns, increased by $2.95/bbl to close at an all-time record high of $102.59/bbl.

“This period in the natural gas market is hard to decipher. We don’t have next month trading yet and everyone is trying to square up their February positions, so this market is tough to call right here,” said Tom Saal of Commercial Brokerage Corp. in Miami. “The withdrawal was in the middle of what people were expecting and I think we are seeing some short-covering coming in here. We will have to see if it is sustainable.” Looking at resistance lines, Saal noted that a double top existed at $9.380 and that if the market was able to get above that level then “we could really scoot higher.”

Citigroup analyst Tim Evans saw the withdrawal in a little different light. “Although slightly less than anticipated, the withdrawal was modestly supportive relative to the 141 Bcf five-year average, reducing the year-on-five-year average storage surplus to 87 Bcf,” he said. “We don’t expect this data to change traders’ minds, however, and the focus is likely to remain on the forward temperature outlook and the pressure on speculative bears to cover shorts.”

With working gas levels as of Feb. 22 sitting at just more than 1.6 Tcf, market watchers are revising their end of withdrawal season storage predictions. Recent cold weather has lifted expectations that March 31 ending stocks might be closer to the five-year average of ending stocks of 1.2 Tcf rather than last year’s 1.5 Tcf. More specifically, the five-year average for the week ended March 28 is 1.242 Tcf, while last year’s storage level for the same week was 1.552 Tcf.

Going into Thursday’s report, most people within the industry expected the current surplus to the five-year average would continue to contract, if only by a few billion cubic feet. A Reuters survey of 24 industry players produced a range of withdrawal expectations from 139 Bcf to 164 Bcf with an average expectation of a 155 Bcf withdrawal. Golden, CO-based Bentek Energy said its flow model for the week indicated a withdrawal of 148 Bcf.

During the similar week last year 145 Bcf was withdrawn. As of Feb. 22, working gas in storage stood at 1,619 Bcf, according to EIA estimates. Stocks are 133 Bcf less than last year at this time. The East region led the charge by removing 100 Bcf from underground stores, while the Producing and West regions withdrew 35 Bcf and 16 Bcf, respectively.

With the cold experienced this week, the report for the week ended Feb. 29 could further narrow the current surplus to the five-year average. The National Weather Service forecasts a moderately higher than normal tally of heating degree days (HDD) for the week ended March 1. New England is expected to experience 248 HDD, or four more than normal, and New York, New Jersey and Pennsylvania are expected to endure 242 HDD, or 17 more than normal. The industrialized Midwest, including Ohio, Indiana, Michigan, Illinois and Wisconsin, is forecast to shiver under 261 HDD, or 23 more than normal.

Market technicians see conditions in place for higher prices. “On Wednesday the expiring March contract closed at $8.930 and now with April as spot natgas it is presently trading at the $9.100 level,” noted Walter Zimmerman of United Energy in a Thursday morning note to clients. He added that a close in the April contract above $9.260 — which was accomplished Thursday — as 0.7862 retracement of the $9.360 to $8.880 decline is all it would take to keep spot futures on track for a continuing rally to the $10.200 to $10.460 area.

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