After receiving a temporary boost when the Energy Information Administration (EIA) reported that 71 Bcf was removed from underground natural gas storage last week, January natural gas futures sunk lower, recording a new low for the move of $6.600 before rebounding to settle at $6.800, up 3.1 cents on the day.

While the 71 Bcf withdrawal for the week ended Dec. 15 was bearish when compared to last year’s 168 Bcf pull and the five-year average withdrawal of 121 Bcf, it came in on the high side of the range of expectations, which mostly ran from 62 Bcf to 73 Bcf. The report’s release was seen by most market watchers as the close for the week from a business standpoint as traders were expected to head for the exits to start their holiday weekends a day and a half early.

After opening Thursday at $6.680, January natural gas ran up to notch a high of $6.750 in the minutes immediately following the storage report. However, the contract dropped lower from there before rallying once again in the afternoon.

“The path of least resistance is still lower,” said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami. “I think we will test something in the $6.50s and that will be it for the time being. As far as the weather is concerned, I think people are going to wait until Tuesday to see what verifies.”

According to the National Weather Service’s updated outlook for the month of January, temperatures are expected to be warmer than normal throughout a large portion of the United States. Readings should be above normal north of a horizontal line that extends from the southern tip of California across the southern borders of Utah and Colorado to the southern borders of Kentucky and Virginia.

Nearer-term, things still appear to be unseasonably warm as well. Frontier Weather’s outlook for Dec. 26-30 calls for above normal temperatures in parts of the West and across most of the northern U.S.

“The natural gas market remains under pressure with no fundamental relief in sight,” said Tim Evans, an analyst with Citigroup in New York. He added that with another historically bearish storage number expected in the report next week, the downside should be left open for a further trend lower.

Market technicians see spot futures approaching if not reaching a $5 handle. Attempts early this week to stage a bear market rally met with naught and Wednesday’s January futures 31.4 cents slide to $6.769 all but sealed the fate of the bulls. “Although natgas managed to give a few preliminary indications of bottoming action, it was our contention that it would not lead to anything more than a short lived bear market correction in a continuing seasonal cycle decline,” Walter Zimmerman of United Energy, noted Wednesday morning. He noted that the bear market correction from Tuesday to Wednesday was very short lived as the feeble attempt at a rebound from Tuesday’s low ended early Wednesday morning. “New lows quickly followed and we expect further downside from here. Our target is the $6.080-5.960 area.”

The median of a Reuters survey of 21 industry players had been looking for a 62 Bcf withdrawal, while the ICAP storage options auction Wednesday revealed a consensus withdrawal of 73 Bcf. A Bloomberg survey of 16 observers showed a median estimate of a 73 Bcf withdrawal with the range from a 38 Bcf draw to a 100 Bcf draw.

As of Dec. 15, working gas in storage stood at 3,167 Bcf, according to EIA estimates. Stocks were 342 Bcf higher than the same time last year and 274 Bcf above the five-year average of 2,893 Bcf. The East region led the withdrawal charge by pulling 52 Bcf while the Producing and West regions removed 14 Bcf and 5 Bcf, respectively.

Due to the upcoming Christmas and New Year’s Day holidays, the EIA announced Thursday that the storage report for the week ending Dec. 22 will be released on Friday, Dec. 29; and the report for the week ending Dec. 29 will be released on Friday, Jan. 5, 2007. Both reports will be released between 10:30 a.m. and 10:40 a.m. EST.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.