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Crude Oil, Weather, Short-Covering Lift Futures 7 Cents

Crude Oil, Weather, Short-Covering Lift Futures 7 Cents

For the second Monday in a row the futures market kicked off the week with a lower open, which featured bears as the early aggressors. That, however, is where the similarities between the two weeks ended. Whereas prices continued down the slippery slope last Monday, yesterday's trend was almost a straight line higher. Sources said a number of factors-technical short-covering, supportive weather forecasts and even a boost from the nearby crude oil trading pit-were reasons for the 7-cent gain to $1.769 in April futures yesterday.

"All eyes were on crude today," commented a trader who downplayed the rally in natural gas. "Even though there is not that big of a [price] correlation, natural [gas] has gotten some good sympathy buying spilling over from the crude pit."

Tim Evans of New York-based Pegasus Econometric Group agreed that natural gas received some "psychological support" from crude oil, but thinks it is almost comical how the oil market is reacting to the OPEC news. "First the market rallied on the general announcement of the 2 million barrel production cut. Then the market surged higher again last week as some of the specifics were released, even though that information called for no additional cuts."

In addition to the support from the energy complex, Evans believes natural gas has received some bullish news of its own this past week. Technically, this market is starting to look nice. Open interest reached an all-time high Thursday afternoon during a price downswing, which usually means speculative selling was the cause. That could cushion the downside and even spur a quick rebound as those shorts move for the exit, Evans reasoned.

But technical factors were not alone in yesterday's price action. Fundamentally, the market also received support from both the six- to 10-day forecast released Monday and the 30-day outlook issued last Thursday. Both call for considerable areas of below normal temperatures, Evans said.

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