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Futures Rebound to Pull Even With Cash

Futures Rebound to Pull Even With Cash

After halting a three-day, 25-cent price slide Tuesday, natural gas futures slowly began to build yesterday what bulls would like to think is a base on which further gains will be added. And although it is far from universal, that sentiment was echoed by others who think that the confluence of relatively strong cash prices and rallying crude oil prices are supportive factors for natural gas. The April contract finished 3.1 cents higher at $1.748 in light trading.

Cash market prices, which many feel have paved the way for the futures market to rebound off February lows this month, experienced little or no change yesterday. But that was not a surprise to a Dallas marketer who reasoned that the cash market was waiting for the futures to catch up. "We saw good convergence today with futures coming in line with the cash market. It will be interesting to see if the cash market can respond by pressing higher [Thursday]."

A California trader is bearish in the long run but admits the market could be ripe for another rally in the short-term. Despite his bearish disposition since the middle of last year, he recognizes that natural gas could be a very dicey sell right now in the face of the rally in crude oil prices. "As a speculator not only does the rally in the energy complex make you hesitate go short, but it also entices you to try to catch the sympathy rally by going a little long natural gas."

And as is the case on any Wednesday, the real juicy market news was withheld until after the close of regular trading. The American Gas Association (AGA) released its latest storage inventory report which estimated a net withdrawal of 134 Bcf for last week. The vast majority of sources were unfazed by the drawdown, noting that it was within the wide swath of market expectations in the 100-147 range just 9 Bcf short of last year's pull. There currently is 1,459 Bcf of working gas in storage, which is 355 Bcf more than at the same time last year.

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