March madness continued at the New York Mercantile Exchange Wednesday after the American Gas Association (AGA) announced that a whopping 140 Bcf was pulled from underground storage facilities last week. Despite coming at the high end of the 110-140 Bcf range of expectations, the withdrawal initiated a selling surge that dropped the April contract to $2.87 just moments following the release of the report. The April contract closed at $2.87, down 14.8 cents for the session and just off its $2.85 low etched just before the close.

According to the AGA, 50 Bcf and 8 Bcf were withdrawn from the Producing Region and the Consuming Region West respectively, with the Consuming Region East accounting for the remaining 82 Bcf. In addition to exceeding most expectations, the 140 Bcf withdrawal far exceeded the 75 Bcf draw from a year ago. Storage now stands 49% full with 1,608 Bcf of working gas, versus 22% full with 711 Bcf last year and 34% full with 1,122 Bcf on average over the last five years. Storage is 897 Bcf above year-ago levels and 486 Bcf above the five-year average.

For one California producer, the market’s reaction Wednesday was not surprising. This is a clear-cut case of “buying the rumor and selling the fact,” he said. Other traders agreed that the market was due for a dip, but cautioned that prices could rebound just as quickly today. Prices moved lower on Tuesday amid a wave of profit taking, but then rebounded to close back above $3.00 Tuesday afternoon.

Also a factor yesterday was the disproved rumor that the American Gas Association was going to issue a correction — possibly decreasing the estimated gas volume in underground storage facilities — along with this week’s report. Traders contacted by NGI Tuesday had mentioned this as a reason for the market’s surprising rebound that afternoon. When the rumor turned out to be false Wednesday, the market went right back down to its pre-rumor level, traders said.

Looking ahead to Thursday’s session, market watchers recognize that natural gas futures are at a pivotal point. Wednesday’s close is right on the fringe of support, clustered between Monday’s $2.83 low and Tuesday’s $2.86 low. A strong opening Thursday would serve to fortify that area, giving bulls the opportunity for a push toward recent April highs at $3.03-04. On the other hand, a gap-lower opening Thursday would create an island top formation, which could set the stage for a slide back to the $2.50-60s.

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