Caught in a mix of short-covering and a delayed reaction to supportive storage news released Thursday, the natural gas futures market turned modestly higher Friday to break the string of losing sessions.

Volume was light, especially for the penultimate trading session of the prompt-month, and that has market-watchers concerned the natural gas has more downside potential. April futures climbed 5.9 cents Friday to close at $5.395 on a volume of just 66,233 contracts.

“After opening at $5.295, the market clawed higher Friday on short-covering ahead of the weekend as well as the termination of the April contract Monday,” said George Leide of Rafferty Technical Research in New York. It was almost inevitable, he continued, pointing to the six-day string of declines prior to Friday’s close.

Crude gave the natural gas bulls a vote of confidence as well Friday, as the May contract rebounded nearly a dollar off its session lows to close at $35.73/bbl Friday. Acknowledging the crude connection, Kyle Cooper of CitiGroup said, “Natural gas prices rose, probably in conjunction with the rebound in the crude market as well as support from yesterday’s [Thursday’s] supportive EIA report.”

Leide agreed and noted that RTR’s poll of its clients had revealed an average withdrawal expectation of 47 Bcf. The Energy Information Administration revealed a strong 65 Bcf withdrawal, decimating the 6 Bcf build reported for the same week last year.

April natural gas options expired rather uneventfully Friday, Leide continued. “The big strike prices — $5.25 and $5.50 — were not touched and the $5.30 and $5.40 strikes did not really attract much attention,” he said.

Heading into expiration-day, Leide suspects Monday’s trading action will be a continuation of the calm exhibited Friday. “I really don’t see the potential for a big wash-out or rally. In the longer term, he is a little bearish. “Natural gas has the potential to tumble lower along with crude. We have sold back off from the $5.75 down to $5.30 and that tells me that the rally was a fake.”

In daily technicals, Leide sees support at $5.18-20 in both April and May. On the upside, resistance is seen at $5.58 and $5.65, in the two months respectively.

Looking ahead, Tim Evans of IFR Energy Services said, “May futures are allowing the $5.34 low from Thursday to stand for a second session, allowing it to jell as support ahead of the $5.28 low from March 4 and the uptrend support shown at $5.26 today. Failure to catch itself above these nearby supports leaves May free to revisit its $5.05 low from Feb. 24 or even its $4.99 low from Jan. 30-Feb. 2.”

Evans noted that a flush through these supports is possible, but would form “a nice intermediate-to-longer-term” buying opportunity.

“On the upside, we see minor resistance at $5.50, and again at $5.55 before the $5.654 high from Wednesday becomes the target,” Evans said. “Any progress past that threshold suggests a full retest of the $5.83 peak from March 17.”

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