After soaring to new 2005 highs following the release of fresh storage data (95 Bcf withdrawal) on Thursday, the natural gas futures market chopped lower late in the session to end the day on a negative note. At $7.238, the April contract finished the session more than 14 cents below its $7.38 top but still up 4.6 cents on the day. Looking ahead, market watchers wonder whether the recent gains in both natural gas and crude futures can be sustained in the short to medium term.

The Energy Information Administration’s storage report showed a withdrawal that was slightly above expectations, and the market’s knee-jerk reaction was to immediately climb 7 cents to trade at $7.38. Analysts agreed that the charge toward $7.40 in the April gas contract was partially due to continued record strength in crude, which rallied to $57.60 before turning lower in the afternoon.

Once natural gas traders saw the decline in crude and had an opportunity to digest the storage data, natural gas futures tumbled lower too. In addition to dwarfing last year’s 43 Bcf pull and the 64 Bcf five-year average withdrawal, the 95 Bcf draw for the week ended March 11 was at or above industry estimates. The ICAP options auction revealed a consensus forecast for a withdrawal of 93.4 Bcf. Working gas in storage still stands at 1,379 Bcf, according to EIA estimates.

Despite the modestly supportive storage data, a prominent local trader is backing away from his bullish stance. “This market feels a little toppy up here…, both crude and natural gas,” noted floor trader Eric Bolling. “The market feels schizophrenic… its almost as if it is anticipating a bearish event.”

A key indicator for the health of the short-term market, Bolling said is the summer-winter spread. “The April-January spread has blown out since earlier in the week. That is an indication that people are giving up on the front end of the market. I would not be surprised if we got some profit-taking here. [Prompt month prices] at $6.30-50 in the next week or so are not out of the question,” he said.

If the gas futures market is to turn lower, it will have to do so in the face of what appears to be a last blast of winter weather in the Northeast. According to the latest eight- to 14-day forecast released Thursday by the National Weather Service, below normal temperatures are predicted for New England across to the Northern Plains. Below-normal temperatures are also expected down the Atlantic coast to Georgia and North Florida for the March 25-31 timeframe.

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