The strong corrective rebound of the April contract seemed indanger of coming to an end yesterday morning when the contract setnew lows for the week at $1.835, but April held and quickly resumedits upward path in afternoon trade to post a new high at $1.930 andclose the day at $1.928/MMBtu.

With the Midwest and Northeast regions being pounded by a latewinter snow storm and temperatures continuing below normal in thosemajor consuming regions, the strength of the cash market is givingsome fundamental support to what has been in large part a technicalcorrection in futures, noted Tom Saal of Pioneer Futures.

“Technically it looks like it wants to work higher, andfundamentally cash held at around $1.86 today so they’re bothmoving up in tandem. Technically we had an outside day. We had ahigher high and lower low than yesterday, and we settled near thehigh. Chances are we’ll trade higher tomorrow,” he predicted.

“We had trades selling, and funds and locals buying today,” saidSaal, indicating there was a significant amount of fresh shortpositions initiated. “Next resistance is $1.93 and I think abovethere it’s $1.96 and then $2. Support is now at $1.875 (theintra-day low) and today’s low at $1.835.”

Saal said he believes about 97 Bcf of gas was withdrawn fromstorage last week, which would reduce the storage surplus for thethird consecutive week, bringing it down to about 318 Bcf more than1998 levels. With the colder-than- normal temperatures continuinginto next week and storage operators eager to meet their cyclingrequirements and avoid penalties, strong storage withdrawals likelywill continue through the end of March. However, it may be tough totop the 143 Bcf withdrawal figure posted during the week endingMarch 13 last year.

In a recent report, Salomon Smith Barney (SSB) said it expected93 Bcf of gas to be withdrawn from storage for the week endingMarch 6, compared with 54 Bcf during the same week last year. SSBis expecting storage to end the winter heating season with a 328Bcf surplus (235 Bcf if temperatures are 10% colder than normal forthe rest of March). The Pegasus Econometric Group said it isexpecting the American Gas Association to report 100-130 Bcf of gaswas withdrawn last week.

One cash trader noted many LDCs haven’t lined up baseload gasthis month in an effort to use up their stored surplus. If thecolder than normal weather persists, heavy storage withdrawals andhigher cash and futures prices will too, he said.

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