The natural gas futures market continued lower Monday as sellers continued to apply pressure to a market weakened by last Thursday’s smaller-than-expected, 89 Bcf storage withdrawal. Though the selling was not especially well organized, it was effective and produced a fractionally sub-$7 settlement for the prompt contract on its penultimate trading session. April, which expires at 2:30 p.m. ET Tuesday, closed Monday at $6.999, down 6.3 cents on the day.

According to the Energy Information Administration, gas in underground storage facilities declined 89 Bcf to 1,290 Bcf for the week ending March 18. Not only did the 89 Bcf pull fall short of industry expectations centered on a 90-118 Bcf withdrawal, it was less than the ICAP-Nymex storage option auction, which pointed to a 95.2 Bcf draw. With only a few more weeks left in the withdrawal season, the market is set to head into summer with ample gas in storage. Stocks are currently 249 Bcf higher than last year at this time and 232 Bcf above the five-year average of 1,058 Bcf.

However, according to the latest hurricane prognostications, the industry may need that buffer. Speaking at the 2005 National Hurricane Conference in New Orleans, Dr. William Gray admitted that the April 1 update of his Atlantic Hurricane Forecast will likely show increases over his previous predictions. In December, the Colorado State University hurricane expert called for an active 2005 season with 11 named storms, including six hurricanes and three major hurricanes with winds of 111 mph or above.

Though expecting that this season would be more active that average, Gray said it is unlikely that 2005 would trump the 15 named storms, including nine hurricanes, six of which were major ones, during 2004.

And while the market may look to price in a hurricane premium for the summer and autumn months, Tom Saal of Commercial Brokerage in Miami is a little bearish in the near term. “There is an area of negative development on the daily chart in the $6.94-99 area and I would not be surprised if we bounced around there for a while… Ultimately, however, the price of natural gas on expiration day will be determined by who is willing to make or take delivery.”

Looking past the April contract expiration Tuesday, Saal notes that there will likely be a roll gap on the daily continuation chart. “The May contract has been trading at about a 12-cent premium to April. Because of that forward carry, we will get a roll gap higher when May becomes the spot month Wednesday.” But don’t mistake a gap higher as a bullish scenario for the market. “A gap higher is actually bearish. Traders love to fill in gaps, and in order to do that they would have to take the May contract lower,” Saal explained.

©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.