After opening at Tuesday’s low of $2.23 and quickly checking down into the teens, the natural gas futures market rebounded late in the session Wednesday on the news that the market withdrew a whopping 190 Bcf from underground storage facilities last week. However, the 30-minute rally was not enough to take back four hours of selling pressure, and as a result the February contract finished with a 5.3-cent loss at $2.228. The out months followed suit, propelling the 12-month strip down to $2.541, a 4.4-cent loss for the session.

According to the AGA, 60 Bcf and 7 Bcf were withdrawn from the Producing Region and the Consuming Region West, respectively, with the Consuming Region East accounting for the remaining 123 Bcf. In addition to exceeding most market-watcher predictions centered on a 145-180 Bcf draw, the net takeaway of 190 Bcf was more than last year’s 167 Bcf figure. Underground storage facilities in the U.S. are now 81% full at 2,666 Bcf.

Looking ahead, even stalwart bears are beginning to hedge against the chance for a price rebound — at least in the short run. Pointing to the large net short position currently held by the non-commercial “speculative” side of the market, New York-based IFR Pegasus would not be surprised by a quick move to the upside. “While the market certainly looks like it wants to resume its downtrend, we remain concerned about the higher degree of speculative shorts already in the market here,” the group wrote in its Pegasus PM Energy Report yesterday. “This could make a further decline sluggish, while adding life to an eventual upswing.”

According to the latest Commitments of Traders Report released Friday by the Commodity Futures Trading Commission, non-commercial traders had increased their net shorts to a substantial, 33,103 positions of open interest. The last time non-commercials held such a large net-short position was in late September of last year when they accounted for more than 35,000 net shorts. However, they spent the month of October buying back a large portion of those shorts and during that time the market rebounded from the low $2.00s to the spike high of $3.54 notched on Halloween by the December contract. Since then, they have reacquired their shorts and prices have moved back down to the low $2.20s.

In daily technicals, Pegasus sees immediate support in the $2.14-17 area followed by psychological buying likely at the $2.00 mark. On the upside, resistance exists at $2.25-27 and then again at $2.31-32. In order to take advantage of a rebound that breaks above that area, the group suggests a buy stop at $2.33.

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