After the back-and-forth activity of the last few sessions, natural gas futures traders took a break on Wednesday as the March contract showed little interest in making a move before closing at $4.532, down 1.1 cents from Tuesday.

Following Tuesday’s 26.4-cent drop, traders were left with the realization that any move higher lacked the necessary support. In addition to citing the economic depression, traders were quick to point out that the second week of February was almost over, leaving winter temperatures not a whole lot of time to draw down supplies.

“I was not surprised in the least that the little bull move of the past week or so failed on Tuesday. Once it got up around $4.850, I was pretty sure it was a top,” said Steve Blair, a broker with Rafferty Technical Research in New York. “I thought it might have been able to at least test the $5 level, but I knew the fundamentals just weren’t there. We have more gas than we know what to do with, we are going through a warm period in terms of temperatures, demand is way off and we don’t have that many weeks of real winter left this season. It is pretty simple…the market comes down from here.”

Blair noted the his company’s support numbers begin to come in around $4.350 or $4.360 and a lot will be decided by Thursday’s natural gas storage report for the week ended Feb. 6. “The storage report Thursday from the Energy Information Administration isn’t likely to give the bulls anything new to work with. No one is expecting a huge number. Certainly nothing approaching a 200 Bcf pull. The bulls are not going to be able to take anything away from the report unless we get a surprise in the neighborhood of a 180 Bf draw or higher. I really don’t think this market has any bullish undertones whatsoever.”

A Reuters survey of 22 industry players produced an estimated range of withdrawals from 154 Bcf to 181 Bcf with an average pull expectation of 166 Bcf. Bentek Energy’s flow model indicated a withdrawal of 169 Bcf, which would bring stocks 13.5% below the five-year high and 0.7% above the five-year average. The research and analysis firm said it expects a 117 Bcf pull from the East region with the Producing and West regions removing 45 Bcf and 7 Bcf, respectively.

The number revealed at 10:30 a.m. EST will be compared to the 143 Bcf that was removed last year for the week and the 166 Bcf five-year average withdrawal.

“Mild weather along with pipeline constraints has caused stocks in the West to reach record levels for this time of year,” Bentek said in its weekly Natural Gas Storage Outlook. “Stocks in the Producing region are also above the five-year average due to small withdrawals early in the season. Larger withdrawals in the last few weeks suggest that with support from weather-driven demand, stocks in the Producing region could end the season right in line with the five-year average.”

As to whether the $4.280 front-month low for the move from Feb. 2 is safe, Blair said all bets are off if we get a surprise withdrawal much below expectations. “If we get a pull of 140 Bcf or 150 Bcf, then support at $4.350-4.360 and $4.280 will be tested…if not broken,” he said. “We are in a bear market and the recent mini run-up was nothing more than a minor correction.”

Some traders saw Tuesday’s large drop as directly tied to the 382-point loss in the Dow Jones Industrial Average. “In practice, it seems that gas markets followed the same road map that oil markets and a number of other markets followed,” said Peter Beutel of Cameron Hanover. Beutel said the reason for the linkage was clear. “If the stock market couldn’t find anything worth buying after an $800 billion stimulus bill and a Treasury Department initiative, energy traders were not going to go sorting through to find something to their liking.”

Longer term, Beutel is circumspect. “If equities rethink the significance of [Tuesday’s] events, and they may well [do so], prices will have a chance to bounce back up. Time is limited, though. If the current thinking becomes downside momentum, important support levels in both oil and gas markets could be breached on the downside. If a rethink is in order, it must come right away,” he said Wednesday morning.

Economy watchers noted that the 8:30 a.m. EST Wednesday release of December balance of trade data by the Commerce Department showed a slight improvement in the U.S. economy. A stout trade deficit had been a characteristic of the U.S. economy up until November when the deficit narrowed to $40.4 billion from $56.7 billion in October. December’s figure was expected to show a deficit of $35.5 billion, but the actual figure came in at a deficit of 39.9 billion, indicating slightly greater consumer demand for overseas products than had been anticipated.

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