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Bulls, Bears Call it a Tie on Expiration Day

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 near-term.

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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