With cold weather permeating the East, it was no surprise that the Energy Information Administration’s natural gas storage report for the week ended Jan. 25 revealed a 107 Bcf withdrawal, far greater than the prior week’s 88 Bcf pull. However, the withdrawal was on the low end of the range of industry estimates and slightly less than the 109 Bcf five-year average and the 115 Bcf pull for the same week last year.

Including this report, the current storage surplus compared to the five-year average of working gas levels moved from 356 Bcf to 358 Bcf.

After bumping its head on the $6.80 mark early in the session, the April natural gas futures contract was pushed down 10 cents to $6.68 in the two minutes following the 10:30 a.m. (EST) report. After an early afternoon rebound, the prompt month continued lower, reaching a low on the day of $6.64 just before settling at $6.657, down 6 cents on the session.

While some market-watchers said the storage report was moderately bearish, others believe it reflected totally the opposite.

Commercial Brokerage Corp.’s Tom Saal said he believes that the report wasn’t bearish at all. “It was bullish, because Thursday displayed a lot higher prices than a few weeks ago,” he said. “What is going on here is the fact that because these storage report numbers are lower than expected, people are hoarding inventories. When you’re hoarding inventory and not pulling it out, the remaining demand has to be fulfilled with flowing gas and that gas gets bid up.

“In my opinion, the less gas that is pulled out, the more bullish it is, while the more gas that is pulled out, the more bearish it is, because you’re pulling it out to meet demand,” Saal added. “The bottom line is, all of this gas in inventory that we are building compared to other years is not moving the price lower. Instead, the price is going higher.”

Saal noted that the natural gas market’s highs are inching upward. “We got up to test that $6.80 area once again early on Thursday, but we failed to get through it,” he said. “We will probably work off of it a little here in the next few days and maybe take another shot at it. We had a triple top at $6.80, and a triple top is not a top at all,” Saal said, noting that a top to a market is usually only hitting one price once or hitting two prices once to create a double top.

“Once you test it three times, you’ll test it four times and so on until you break it,” Saal added. “Eventually I think we will get through $6.80 and then $7 I think will be the first stop. At that point, you’ll probably find some people wanting to sell it, so there will probably be some resistance there.”

GSC Energy’s Craig Coberly said Thursday morning that the outlook for gas to move higher after a short-term consolidation looks solid. “The question in the short-term is whether the consolidation is complete,” he said. “Technical evidence is mixed and doesn’t provide a high probability answer. My hunch is that it is not complete, but without solid technical evidence to back it up, it is just that: a hunch.

“The shallow nature of the correction so far does say, if the correction is not complete, about $6.56 is likely to be about all the downside we see,” Coberly added. “And, I’ll stick with the March 6-11 timeframe for the end of the sideways pattern.” Coberly said he expects the prompt month to move to the $7.30 area or above before the next period of consolidation or corrective decline.

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