The natural gas futures market showed little reaction to the 49 Bcf withdrawal reported by the Energy Information Administration in its weekly gas storage report on Thursday morning. The number that was within the range of market expectations. However, as the mercury continued to drop in key eastern energy markets Thursday, January natural gas futures pushed higher, settling at $13.027, up 44 cents for the day.

The market gapped higher at the opening bell for the third straight session in a row. After opening at $12.690, January natural gas futures traded at $12.790 just prior to the 10:30 a.m. EST storage report. In the minutes following the report, the prompt month dropped to $12.650, followed by a late morning plunge to the day’s low at $12.380. However, the rally started from there, pushing the contract higher throughout the afternoon to the close of regular trade.

While some industry insiders were calling for a withdrawal in the 50 to 60 Bcf range and others were looking for a pull in the low 40s, Wednesday afternoon’s ICAP-Nymex storage options auction hit the number on the head with a 49 Bcf withdrawal estimate for the week.

IFR Energy Services analyst Tim Evans said that while the 49 Bcf net withdrawal from U.S. natural gas storage for last week “may have bettered some prior estimates…it was an exact match with Wednesday’s ICAP auction figure and can therefore hardly constitute a surprise. We think the key is not that the data was bullish or bearish but that it will allow the market to quickly refocus on the current cold snap,” he said.

Rafferty Technical Research broker Steve Blair, said, “Most people I talked to were expecting a number close to what the EIA ultimately revealed. The 49 Bcf draw was pretty much in line with expectations, which were between 45-50 Bcf. So, the number was a non-event,” he said. “I think the story in this natural gas futures market is the fact that we hit some pretty major support numbers on Monday down around $11.200 and then we bounced. I think the strength we are seeing is a combination of the convincing bounce off of technical support levels tied in with the return of cold weather. That is what propelled this thing.

“With the close above $13, we have now closed above our major resistance level around $12.70. Other people I spoke with felt that a close above $12.95 or $12.97 was a key sign.” Trading on Thursday accomplished both.

“From what I heard, when the market sold off in the morning it was the work of the local traders,” Blair said. “I guess when they couldn’t continue to drive it down, they reversed course.”

Blair said he believes there is probably a little more room to the upside price-wise, although he doesn’t personally see reason for it to be as high as it is. “I think this thing will eventually collapse under its own weight because I don’t think it has any business being this high at the beginning of December when the market is just seeing a little cold and storage levels are still comfortable,” he said. “However, you have to keep in the back of your mind the fact that a percentage of Gulf of Mexico production is still offline due to hurricane damage. If we get a real cold stretch with frigid temperatures in the next few weeks, that shortage of Gulf production is going to rear its ugly head and we will see huge price spikes.”

Advest Inc. broker Jay Levine had a different take on the storage report. “Most were expecting a withdrawal around 40 Bcf, and it came in on the high side with a 49,” he said. “Like [Wednesday’s] seemingly overall friendly/bullish inventory stats, a high number could help keep prices high, but I also suspect yesterday’s rise helps to diminish any effect a higher number may have.”

When compared to historical analogs, the 49 Bcf withdrawal was pretty bullish. For the same week last year, 7 Bcf was pulled from underground stores. The five-year average withdrawal for the week stood at 44 Bcf.

As of Nov. 25, working gas in storage was 3,225 Bcf, according to EIA estimates. Stocks are 75 Bcf less than last year at this time and 190 Bcf above the five-year average of 3,035 Bcf.

The cold East region withdrew 41 Bcf for the week, while the Producing and West regions pulled 7 Bcf and 1 Bcf, respectively.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.