Adding to the losses triggered by the release of fresh American Gas Association storage data Wednesday, natural gas continued lower early in the session yesterday only to stabilize at midday as scale-down buying interest met equally with profit-taking long liquidation. The March contract finished the session at $2.186, down 5.9 cents for the day, and just off its three-day low at $2.18.

Several traders contacted by NGI Thursday were trying to figure how a surprisingly large 156 Bcf withdrawal announced Wednesday by the AGA could spawn a 22-cent landslide from the $2.41 high. “I was looking for this selling on Tuesday, before the report,” a cash trader commented. “I guess the market needed the comfort of knowing the storage number before it sold off.”

One possible explanation for the sell-off was that expectations for the storage withdrawal were ratcheted up throughout the morning on Wednesday and when they were proved inaccurate, the market dropped lower. Although his personal estimate was for a 145 Bcf withdrawal, Jay Levine of Advest Inc. noted that there was talk calling for as much as a 200 Bcf drawdown in the hour before the AGA release Wednesday.

Regardless of how it compared with expectations, storage remains a dark cloud over this market. At 2,056 Bcf, gas in underground facilities across the country stands 1,015 Bcf above year ago levels and 620 Bcf more than the five-year average. Add to that the bearish combination of price-negative medium- and long-range forecasts and you have a fundamental recipe for lower prices, traders said.

According to the latest long-lead outlooks released yesterday afternoon by the National Oceanic and Atmospheric Administration, above-normal temperatures are expected across the entire nation except for a small area of the Southeastern U.S. where normal temps are forecast for the month of March.

However, fundamental factors do not always tell the tale, and analysts are beginning to fear that because fundamentals have been bearish for so long, the market may have turned to technicals for direction. If that is the case, there are some constructive chart features for bulls to point to. Chartist Cynthia Kase of Kase and Company in New Mexico is cautiously optimistic and favors a rebound as long as “prices do not trade much below $2.12.

“On a renewed move up, look for a possible stall in the $2.30-35 range,” she wrote in a mid-week note to her clients. “On a close over $2.35, look for $2.50 next. If prices break below $2.12, then its probable that the swing low of $1.96 will be tested.”

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