Bulls, Bears Call it a Tie on Expiration Day
Expiration day in the natural gas pit had a little something for
everyone Monday. While bears were greeted yesterday morning by a
lower open that paved the way for declines to the $1.80 level,
aggressive afternoon buying put a smile on bull-traders' faces as
it led the April contract back above Friday's best levels. But when
all the dust had settled and the final settlement price was handed
down from the data room at Nymex, neither bull nor bear could claim
the see-saw battle as a victory or a defeat. April finished down
just 0.2 cents at $1.852 and the May contract echoed that sentiment
closing 0.2 cents lower to $1.883.
A Dallas marketer wasn't the least bit surprised by the early
move lower. "We were looking at regression analysis that called for
the market to move back into the $1.70s today, but it looks as if
short-covering prevented that."
And although short-covering has been the vehicle to drive prices
out of their winter rut, sources are increasingly pointing to the
upcoming storage injection cycle as fuel for the rally. Many feel
that despite the looming 300 Bcf-plus year-on-year surplus,
physical demand for storage injections, coupled with attractive
forward-carry arbitrage opportunities will help buoy prices in the
But New York-based Pegasus Econometric Group feels this is a
bull market still in search of a reason, pointing to mild weather
patterns expected this week. In their Natural Gas Report dated
Monday, the group writes the May contract has performed well
despite the "lack of a compelling fundamental story."
They add that recent congestion in the $1.765-825 area should
provide support for May. On the upside, Pegasus targets Friday's
high of $1.905 ahead of the $1.95-98 level to serve as tiers of
resistance. "There may be more work to do first, but we see the
market as setting up for a breakout above $1.98, leading to a bull
run reminiscent of the one from a year ago."
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