Traders didn’t quite know how to handle the news Thursday morning that 86 Bcf was withdrawn from underground natural gas storage inventories for the week ending Jan. 22. Immediately following the 10:30 a.m. EST report, March natural gas futures — in its first regular session action as the front month — seesawed up and down before resuming its test of lower values.

Just prior to the report’s release March futures were trading at $5.143, but immediately following the release of the number, which was mostly in line with industry expectations, the prompt-month contract put in a low of $5.060 and a high of $5.220. The March contract went on to close at $5.138, down 8.6 cents from Wednesday’s regular session finish.

Looking at the Reuters, Dow Jones and Bloomberg storage surveys, which were calling for draws of between 104 Bcf and 108 Bcf for the week, Citi Futures Perspective analyst Tim Evans deemed the storage number “bearish,” but he wondered whether it was bearish enough to bring in sustained selling.

“The 86 Bcf in net withdrawals was at the low end of the range of market expectations, but we’ll now see what the market can make of that in terms of price damage,” he said. “There is still some potential here for prices to hold and turn higher in our view as the market looks ahead to higher withdrawals in the weeks ahead.”

Heading into Thursday’s storage report from the Energy Information Administration (EIA), industry withdrawal estimates were all over the map. The one thing everyone agreed on was that the withdrawal would be significantly smaller than the 200 Bcf-plus draws of the prior two weeks. Evans had been expecting a withdrawal of 135 Bcf, while Bentek Energy was projecting a withdrawal of 79 Bcf. The actual 86 Bcf draw was considered bearish when compared to last year’s 185 Bcf pull and the five-year average pull of 179 Bcf.

As of Jan. 22, working gas in storage stood at 2,521 Bcf, according to EIA estimates. Stocks are now 120 Bcf higher than last year at this time and 87 Bcf above the five-year average of 2,434 Bcf. For the week the East Region withdrew 67 Bcf while the West and Producing regions removed 16 Bcf and 3 Bcf, respectively.

Below-average pulls could continue in the report released next week as well. The National Weather Service forecasts below-normal accumulations of heating degree days (HDD) for the week ending Jan. 30. New England is expected to see 223 HDD, or 60 fewer than normal, and New York, New Jersey and Pennsylvania are forecast to have 213 HDD, or 50 fewer than normal. The Midwest from Ohio to Wisconsin is expected to experience 270 HDD, or 23 fewer than normal.

Purely directional traders such as hedge funds see no clear long-term direction to the market although in the immediate term they are playing the market from the short side. “Two days ago the intermediate term model was short and it still is,” said a Texas fund trader. He added that “everything else is neutral, but in the bigger picture I think the $5 handle holds just because the intermediate term [five- to six-day] program is short does not mean that there is any kind of logical progression to the longer term models going short as well. I think the trading is just going to be choppy, and with the current weather being moderate, prices may dip below $5 for a brief moment but retain the $5 handle.”

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