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Tight Trading Range Leaves Futures a Half-Cent Higher

Tight Trading Range Leaves Futures a Half-Cent Higher

After etching what some feel could be the range for the remainder of the April contract's life with Monday's $1.69 low and Tuesday's $1.825 high, the market stayed pat Wednesday-trading inside a tight 3-cent range. And while no fresh fundamental forces were seen to usher the market in either direction, sources indentified a host of limiting technical factors in yesterday's price action. The April contract finished up 0.5 cents to $1.795.

The New York Mercantile Exchange was forced to suspend trading twice during the Tuesday evening Access trading session due to problems with data feeds to outside vendors, a Nymex spokesperson said. After a 5-minute delay, the after-hours computer-only session opened at 4:05 PM EST and traded until 4:55 when trading was once again suspended. The second outage lasted until 7:25 PM.

And Ed Kennedy of New York-based Pioneer Futures was quick to point to the abbreviated Access session as an early determinate in yesterday's trading. "There was quite a bit of pent up selling [Wednesday] following the late drop right before the close Tuesday," he said. However, just as the buying had dried up on Tuesday's early move higher, so did the selling in Wednesday's move lower. "The market just died at that point," Kennedy continued.

Despite being mildly bullish in the intermediate to longer term, Kennedy is not convinced higher prices will arrive in time to salvage the April contract, which expires Monday. "I am looking for a range of $1.67-80, with an expiration price around $1.75," he concluded.

A Houston marketer agreed with the lower end of Kennedy's range. "It's always tough to pick a bottom, but I think you need to own anything in this market with a six after the decimal point. He continued, adding that hedging for the upcoming storage injection season will become an increasingly important factor in the direction of prices. "With the market in its current state of contango (a situation in which prices of out months are successively higher going forward) it makes economic sense to buy prompt month futures and sell the out months to cover your storage injections. That should put upward pressure on the front month," he reasoned.

The AGA released its storage report last night, which estimated 87 Bcf was withdrawn during the week ending March 19. Although some sources were quick to tag the news as a non-factor in the market, others viewed the data as "slightly bullish" for prices. "Not only did [the withdrawal] eclipse most expectations, but it also was more than last year's 78 Bcf pull," a Chicago-area trader noted. There is now 1,372 Bcf of gas in storage, 346 Bcf more than last year.

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