A casual observer of Thursday’s futures market might see March’s 4.5-cent decline and $5.74 settle and assume it was another day of light profit taking following a slightly bearish storage report (150 Bcf withdrawal). However, on closer inspection Thursday’s session was anything but “just another day,” with wild price swings, high volatility and a 30-cent trading range.

After dipping in the moments immediately following the 10:30 a.m. EST storage release, natural gas futures catapulted higher on local and fund buying. At one point Thursday morning, the March contract was 26 cents up from its daily low and 17.5 cents stronger for the session. But after reaching the $5.96 level, buyers had nothing left and sellers were seen ready to protect psychological resistance at $6.00. The market tanked and by early afternoon had extended to a new one-week low at $5.66.

According to the Energy Information Administration, storage decreased by 150 Bcf to 1,371 Bcf during the week ending Feb. 7. Versus expectations for a 160-170 Bcf draw, the withdrawal figure was slightly on the bearish side. The drawdown also fell short of last week’s 208 Bcf withdrawal as well as the year-ago 172 Bcf report. Stocks stand at 789 Bcf less than the same time last year and 324 Bcf below the five-year average of 1,695 Bcf.

Taking into account cold air experienced by the eastern half of the nation this week, traders are already bracing for what might be a bullish storage figure next Thursday. Citing degree-day heating data forecasts of 197 versus 176 last year, Thomas Driscoll of Lehman Brothers, looks for a 160 Bcf drawdown to eclipse the 124 Bcf comparison from a year ago as well as the five-year average at 91 Bcf. Traders agreed that it was this bullish expectations like this one that helped to fuel the market’s spike Thursday.

In the end, however, the convergence of bearish weather and technical factors weighed on the market Thursday and several market watchers expect the downside momentum to continue Friday. Pointing to the string of three consecutive sessions of lower lows and lower highs, Tim Evans of IFR Pegasus in New York is concerned with the markets short-term trend and questions whether support at either $5.65 or $5.565 is enough to stem the price slide. “The market remains [susceptible] to any further bouts of colder than normal winter, but may have more work to perform on the downside until the next arctic blast is identified,” he wrote in a note to customers Thursday.

Although he was impressed by the market’s ability to rebound so strongly off support at $5.70 early Thursday, George Leide of New York-based Rafferty Technical Research was not fazed by the morning rally. “There were a number of people who in the back of their minds were looking for a withdrawal in the 130s [Bcf] and when that failed to materialize, they pushed the market higher this morning.” Looking ahead, Leide still likes the downside and sees an opportunity to short the market on a break of the $5.66-70 area for a run down to the $5.47-50 area.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.