Natural gas futures values crashed down to last week’s price levels following news Thursday morning from the Energy Information Administration (EIA) that a larger-than-expected 31 Bcf storage build occurred during the week ending April 2.

After hovering just below $4 in Thursday morning trade, the May contract in the minute prior to the report’s 10:30 a.m. EDT release spiked to $4.099 as some traders were obviously expecting a much smaller storage build. Once it was revealed that a stout 31 Bcf was injected into underground stores, the prompt-month contract immediately dropped to a low of $3.857 before closing out the day’s regular session at $3.909, down 11 cents from Wednesday’s close.

While the injection came in just shy of his 35 Bcf prediction, Citi Futures Perspective analyst Tim Evans allowed that the report has “neutral to bearish” implications. “The 31 Bcf build was just above the consensus expectation and bearish relative to the 11 Bcf five-year average for the date,” he said. “With the weather outlook implying further above-average injections over the next couple of weeks, the context for the report is bearish as well. This is not a big shock for a market that has been declining for six weeks in anticipation of weak heating demand, but it does reinforce the bearish sentiment.”

Going into the report, much of the industry had been expecting an injection in the mid to high 20s Bcf area. A Reuters survey of 25 industry players produced a range of injection estimates from 15 Bcf to 40 Bcf with an average build expectation of 29 Bcf. Bentek Energy was projecting an injection of only 23 Bcf. In addition to being bearish when compared to the five-year average, the 31 Bcf build was also bearish when compared to last year’s date-adjusted 17 Bcf injection.

As of April 2, working gas in storage stood at 1,669 Bcf, according to EIA estimates. Stocks are 2 Bcf less than last year at this time and 180 Bcf more than the five-year average of 1,489 Bcf. The Producing Region injected 31 Bcf all by itself, while the West Region chipped in 3 Bcf. However, the East Region was still in takeaway mode with a 3 Bcf withdrawal.

Taking the bearish injection into account, Credit Suisse analyst Teri Viswanath said she believes it will be difficult for the bulls to find any traction with the overall natural gas picture looking the way it does. “We think that the higher-than-expected injection could prove to be the final straw, as prices continue to slide further below the $4 mark,” she said. “Now that the market jitters over possible EIA 914 revisions have subsided [see related story], the lack of any fundamental support for natural gas on the horizon will likely allow traders to retest the all-time lows for the May 2010 futures contract.”

Going into trading Thursday, some saw the day’s close as a make-or-break moment for traders. “If you see a close under $4, we could see $3.500; that’s the next step lower,” said a New York floor trader Thursday morning.

Students of retracement analysis are a little more forgiving. They see prices within a range, but both the bulls and bears need to prove their cases. “Bears have no case for new lows unless $3.922 (0.7862 of $3.810-4.334) can be decisively broken,” said Brian LaRose of United-ICAP. “Bulls have no case for a seasonal advance unless $4.542 (0.382 of $5.680-3.810) can be exceeded. In between support and resistance is neutral territory. Take out $3.922 and the bears would have room to $3.525. Break above $4.542 and the bulls would have room to $5.230 minimum.”

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