The bearish American Gas Association storage report was too muchfor the April contract last week. Despite strength that sent thecontract to a new high of $1.965 last Wednesday, April ended theweek near its low, down 9.4 cents on news that a large storagesurplus remains. After falling 12.1 cents on Thursday, the contractattempted an initial push Friday morning but immediately loststeam, dropping sharply to a low of 1.750 only to zigzag sidewaysthe rest of the day before closing down 6.1 cents at $1.759/MMBtu.

The continuing downturn led some observers to wonder if theeight-day up-trend prior to Wednesday’s Access session was merely ashort-term correction in an overall bearish market that has lastedsince last fall. “We’ve kind of gotten to the threshold where itkind of calls into question whether you’re having a downwardcorrection within an up-trend or whether you’re doing somethingmore significant than that,” said Tim Evans of the PegasusEconometric Group. “I’d like to leave the question open as long asI can.”

The Commitment of Traders report, released by the CFTC onFriday, showed that the reportable non-commercials instead of beingnet short 30,000 contracts as they were two weeks ago last Tuesday,were net short only 585 contracts as of March 9. “There isessentially no short vulnerability left in the market,” one analystnoted. “That puts us in a position that is, at least from acommitment standpoint, dead neutral. We have to either convincethese funds that they need to get themselves long and the only waywe’re really going to do that is to break above $1.965. Even if wewere up 10-12 cents on Monday, that’s still not likely to impressthem.”

But Evans predicts the April contract will continue to worklower Monday and Tuesday. “About $1.70 is the next benchmark[support] area,” he said. “If we break that level then you’relooking at a retest of $1.625.” There’s a problem on the technicalcharts because of the rapid rise of the April contract, Evansadded. “The market rallying straight up was impressive, but thenwhen we pass back down through that same price range there’s no wayfor the market to get a toehold and catch itself.”

Other observers see some potential short-term strength comingfrom the weekend weather report, which is calling for a Nor’easterto visit the East Coast. The major storm was making its way acrossthe Plains’ states on Friday dumping huge amounts of snow and wasexpected to cause severe thunderstorms across the Southeast priorto turning up the East Coast.

“Weather I think is going to tell the story next week,” said EdKennedy of Pioneer Futures. “I do think we’re getting a littleover-sold. That’s only a technical opinion but if it does try torally it will run into pretty heavy selling in the low-80s. Some ofthe models are saying the strength of this Nor’easter going up theEast Coast is going to be great and it will suck a lot of cold airout of Canada; some of the other models are saying no.”

If the storm fizzles, however, Kennedy said he’s expecting themarket to go into a new sideways trading range not using the highsof last week as the ceiling but developing somewhere between thelow-70s and low-80s. “We’re at $1.760 and I don’t have the warmfuzzies one way or another,” he said.

Jeff Manna of Omaha-based Strategic Weather Services said thestorm probably won’t hit New England until late Sunday. “Mondaylooks pretty nasty,” he said. It’s expected to be “real close tothe big cities.” But there still is some question about the snowline. “Right now I tend to believe it will be cold enough to snow[from Philadelphia northward through New England]. New York,Hartford and Boston could really be in for something. If we getenough cold air in there the potential for six to 10 inches ispretty likely,” said Manna.

The weekend weather report may be very exciting but the NationalWeather Service’s new six- to 10-day outlook has the middletwo-thirds of the country carved out for above normal temperatures.Normal temperatures are forecast March 18-22 over the East Coastand Rockies with the Pacific being the only region visited bybelow-normal temps.

“I don’t see anything behind this storm,” Manna agreed. “We’llbe seeing a pretty good warm up by at least the middle part of nextweek across all of the eastern U.S. Some real warmth also will becentered over the Plains states.”

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.