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Top Trader Staying Short; Expiring April Called 3 Cents Lower

The expiring April natural gas futures contract is set to open 3 cents lower Friday morning at $2.64 as traders see continued market weakness yet have to deal with erratic weekend weather conditions. Overnight oil markets fell.

Top analysts see Thursday's 5-cent drop in the April contract as consistent with current market thinking. Jim Ritterbusch of Ritterbusch and Associates also "anticipates gradual downside price follow-through going forward. The 12 Bcf injection was only a few Bcf larger than industry ideas. But the market appeared to be responding to the fact that the increase developed a couple of weeks earlier than normal and was partially reflective of a significant production upswing.

"The supply shortfall against five-year average levels narrowed to 194 Bcf and will likely disappear next month if temperature forecasts shift toward the mild side," Ritterbusch said. "We still see the dynamic of rising production as a key pricing determinant during the next couple of months that will require further discounting. We suggest simply staying with the program for now in maintaining any shorts established above the $2.82 level as we still target the $2.50 area. The breakdown in the May contract to lowest level since early February will place longs on the defensive well into next month."

Gas buyers for power generation across the MISO footprint will have their hands full going into the weekend as forecasts call for cold along with fluctuating renewable supplies. WSI Corp. in its Friday morning outlook said, "Unseasonably cold high pressure will continue to slide across the power pool during the next one to two days. Highs may only range in the 30s, 40s to low 50s along with lows in the teens, 20s and 30s. High pressure will gradually depart during the weekend, which may lead to a moderating trend. However, a fast-moving Alberta Clipper may race across the power pool late Saturday night into Sunday with a chance of rain and snow showers, as well as gusty winds.

"Wind generation is expected to subside and become relatively light [Friday]. Wind gen is expected to ramp back up and become strong during the weekend due in part to the clipper. Output may peak near 8-10 GW during Saturday night into Sunday. Wind gen will likely subside from this peak but may remain elevated early next week."

In overnight Globex trading May crude oil fell 57 cents to $50.86/bbl and May RBOB gasoline dropped 2 cents to $1.8643/gal.

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