With traders unwilling to bet too heavily ahead of the release of fresh inventory data Thursday, the natural gas futures market continued its sideways price action Wednesday. By virtue of the modest mid-morning sell-off, bears were able to claim the day as a victory, with April prices slipping 4.1 cents to close at $5.397.

Traders polled by NGI pointed to moderating weather forecasts and softer cash market prices as contributors to the futures market decline. Although temperatures are still expected to drop to below-normal in the Upper Midwest over the next several days, the severity and duration of the cold has moderated in the latest short-term weather forecasts. During the March 16-20 timeframe, spring breakers will enjoy above-normal temperatures from Sugarloaf, ME, to Key West, FL.

But the milder weather forecast was not the only factor in bears’ favor Wednesday. Also pressuring prices was apprehension ahead of Thursday’s storage report. Noting that actual heating degree day tallies for last week were lower than originally forecast, Citigroup’s Kyle Cooper lowered his storage expectation to a 21-31 Bcf withdrawal. Meanwhile consensus estimates call for a 37-42 Bcf drawdown, which if realized would fall dramatically short of the year-ago and five-year average draws of 102 Bcf and 75 Bcf respectively.

Moreover, a draw in that band would reinforce the belief that the winter heating season is already over and that storage will end the withdrawal season just below the 1,000 Bcf mark.

Although a whopping 224 Bcf was pulled from the ground during the same week last March, that is considered an anomaly versus the five-year average March net draw of roughly 150 Bcf.

In daily technicals, the April contract continued to behave within the confines of a short-term pennant formation marked by lower highs and higher lows. Technical analysis suggests this is a pause in what may be a larger bull trend, with an inevitable breakout to the upside. On the downside, however, the $5.20 low is within striking distance and technicians note that a breach of this level could lead to an immediate test of the Feb. 24 low at $5.03 or psychological support at $5.00.

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