After reaching a new life-of-the-contract high on Monday,follow-through technical buying propelled the April gas futurescontract sharply higher again yesterday. April ended the regulartrading session up 7.5 cents at $2.761 after reaching a high of$2.770. The low for the day was 10 cents down from that at $2.660.May climbed 7.6 cents to $2.771 and the summer strip (Apr.-Oct.)ended the day very strong at $2.786, up 6.5 cents for the session.

“To me it’s almost entirely technical in nature,” said onemarket analyst. “We’re pulling some fund buying and somespeculative long accumulation into the market here and perhapsgetting consumers to chase some of the forward contracts as well bygetting new life-of-contract highs on these markets; that’s toughto ignore even if you are suspicious that it’s not a sustainableadvance,” he noted.

“But I’m highly suspicious. There’s no weather behind this.We’ve got temperatures that have highs in the 50s in Chicago andNew York. We’ve got forecasts out as far as March 9 that indicate astable weather pattern featuring that mild weather. The recenttrend in storage has been bullish, but that’s looking in therear-view mirror. Last year’s withdrawal for the week ending Feb.25 was relatively high, and if you look at the heating degreeaccumulations last week, they were pretty minimal. I think we couldbe looking at something like 50-60 Bcf withdrawal [in today’sAmerican Gas Association storage report], which isn’t very much.”

The market opened lower yesterday, tested the downside butdidn’t get far at all before popping back to the recent high anddrawing in significant local and fund buying.

“I bought it today,” said one upbeat local. “We crossedyesterday’s support level at $2.655 and bought in a $2.68. Nowwe’ll have to see how it opens tomorrow. I’m not going to swear byit, but it looks damn good.”

One observer said he thinks it’s a bit ironic that during thepast month when a series of bullish storage withdrawals were beingreported, the market was weak and uncertain, but now it’s strongwhen it’s likely that the AGA will release a bearish storage reporttoday.

“Sometimes the spring is the silly season for natural gas —not that spring has a monopoly on silliness. But what can happen isthat the market could rally on an idea related to what might happenin the summer — along the lines of, ‘Oh, I hear it’s going to bea hotter than normal summer’ or ‘man there sure is a lot ofgas-fired generation being installed.’ If it takes holdpsychologically, it can take hold for a couple weeks. When you lookat the charts right now a lot of the summer looks stronger than thenear-by [months].”

If April closes over $2.769 on the weekly chart, it would be thehighest close on the weekly chart since November and could add tothe momentum, the local added. “But you’ll get a lot of sellingbetween the $2.78 area and $3.195. It seems like we’ve beenbuilding just one big huge base since January. We need to tradebetween that area, $2.78 to $3.20. There’s just a lot of open spacein there. It has to break above $2.78 and stay up there and do somework instead of going up there and failing. It’s not going to be aneasy ride, I’ll tell you that. It should rally. You are eithergoing to get one big move that’s going to give you the high sign,or you are going to fail and open up lower and get divergence.”

This market could “turn on a dime, and you’ve got to be preparedfor that,” he added. Despite being “pretty bullish,” he said, if itdoesn’t open up higher, “you probably should look for a pull-backto $2.68 or $2.665, then $2.615.”

If it breaks out above the $2.78 level, which is the near-monthhigh set on Feb. 2, there could be significant upside. Thenear-month market has zigzagged between $2.465 and $2.78 sinceFebruary.

“Fundamentally, I just can’t see how it’s going to be a wholenew ball game,” said Susannah Hardesty of Energy Research andTrading. “I think it’s going to $2.82 maybe $2.85, but I seriouslybelieve the AGA storage numbers are finally going to have a bearishimpact on this market.”

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