After gapping higher on Friday en route to a new contract high, the April natural gas futures contract gapped lower at the open Monday as traders alleviated overbought conditions and reacted to mixed weather forecasts. Selling was spread throughout the open-outcry session and was enough to thwart several attempts by bulls to prop up the market.

April closed at $7.162, down 93.9 cents for the session, but above significant support at $7.10. Even harder hit were the out months, however, led by the May and June contracts, which each declined by more than a dollar on heavy strip selling.

Weather outlooks were a mixed bag Sunday and Monday. Traders were quick to point to moderating temperatures predicted by the National Weather Service in its computer-generated Sunday afternoon forecast as a central reason for the sell-off in the Sunday night/Monday morning Access session. However, that forecast and the associated losses were cast in doubt Monday afternoon when human forecasters at the NWS updated the six- to 10-day outlook, saying the northern half of the country will continue to experience below normal mercury readings.

In his own report released Monday morning, Salomon Smith Barney meteorologist Jon Davis sided with the Monday report from the NWS calling for more below-normal temperatures for the northern half of the country. And while Davis is quick to note that moderating temperatures will finally take hold after March 15, he admits that temperatures in Canada and the northern tier of the U.S. until that time could exceed 10 degrees below normal.

Because of the chilly weather last week and in light of the weather forecasts going forward, market watchers are already bracing for several more bullish storage reports. Citing degree day heating accumulations for last week and predictions for this week, Thomas Driscoll of Lehman Brothers in New York sees a combined 295 Bcf being reported in the next two storage reports (185 Bcf and 110 Bcf). If realized, draws of that magnitude would exceed year-ago analogs of 143 Bcf and 91 Bcf respectively.

The storage and weather outlook may not be the only supportive features. Also on bulls’ side is the technical picture. While some suggest the back-to-back chart gaps have left an island reversal top on the daily chart, others are impressed by the market’s ability to hold above support Monday. “The second level of support for April is $7.10. [and prices] could certainly relax to this level, wrote Cynthia Kase of New Mexico-based Kase and Company in a prophetic note to customers Sunday. “While resurgence to the upside would likely not take place right away, the odds remain open for it to take place provided the support level holds.”

However, should support at $7.10 fail to hold, Kase sees the potential for prices to drop back to $6.30, basis the April contract. After a small uptick in afternoon, open-outcry trading, the market appeared to be adding to those gains in early evening Access trading last night. As of 5:30 p.m. EST the April contract was 13.7 cents higher at $7.299.

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