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Energy Prices Stuck in Neutral

Crude oil falls, but natural gas is higher.

Updated from 1:46 p.m. EST

Energy prices were mixed in Thursday's trading session at the New York Mercantile Exchange after the Energy Information Agency released natural gas inventory figures that were in line with analysts' expectations.

Natural gas finished the session up 2 cents at $7.26 per million British thermal units, according to the Nymex. Crude oil edged a cent lower to $57.99 per barrel. Heating oil was down a penny to $1.63 a gallon, and gasoline fell 3 cents to $1.59 a gallon.

The EIA reported that 259 billion cubic feet of natural gas were withdrawn from inventories during the week ended Feb. 9. Analysts were expecting a draw between 252 and 257 billion cubic feet. The report showed that 2.09 trillion cubic feet of natural gas remained stored in inventory at the end of the week, 14.7% above the five-year average for this time of year.

Freezing temperatures covering much of the country during the first week of February had some analysts expecting a larger withdrawal from inventories. Natural gas is the primary source of energy for heat during the winter months. Energy prices initially fell sharply on the news that natural gas inventories remain uncommonly high, but they rebounded from their daily lows.

"With less than six weeks left to go until spring begins, the winter window is rapidly closing in on the bulls," wrote Edward Meir, energy analyst at Man Financial, in a research brief. Energy prices have largely been riding on temperature forecasts in recent months. As spring approaches, temperature will have a much smaller effect on energy markets.

Even so, other analysts aren't quite as confident that the springtime elbow months are upon us. "Temperatures will still be a factor in the next few weeks, and we could see oil and gas prices push higher," said Joe Palmisano, technical analyst at IDEAGlobal in New York. Palmisano believes that an intermediate-term push could send oil to $61 per barrel and natural gas back toward its November highs near $8 per million BTU.

The higher-than-average natural gas inventories have been priced into the market, he says, and probably won't send natural gas prices lower than they already are. He also said that the recent selloff in crude oil must be respected. A near-term $55 crude oil price wouldn't be very surprising, according to Palmisano.

Larry Levin, technical analyst at Secrets of Traders in Chicago, says that the key bottom support level for natural gas is $6.190 per million BTU. Levin predicts that this level will likely be reached sometime next week.

"If the $6.190 level is punctured, a lot of sellers will be drawn into the natural gas market," said Levin.

Among equities, the majority of stocks in the energy complex ended down on the day.

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