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Futures Rally has Sources Looking to Past

Futures Rally has Sources Looking to Past

Feeding off late gains notched by the expiring April contract Monday, May kicked off its campaign as the spot month at Nymex yesterday by continuing higher in active trading. And whereas April contract made its mark in a late short squeeze, May was prompted higher throughout the day by a steady stream of commercial and speculative buying. Several sources also pointed to buy-stop orders, which were triggered as the market moved through the $1.93-95 range as a reason for the strength. May finished up 9.5 cents at $1.978.

Looking back to the end of January, a Houston marketer said the February contract's strong finish, followed by March's strong start and subsequent fall could be a blueprint for this market. "March blasted higher initially into the mid-$1.80s but then came off hard for the rest of the month."

He continued, saying that while the month of April will likely experience the same bearish weather as February, it will not share the same storage situation. "Most Northeast storage operators will rest their storage reservoirs for the next two or three weeks before the injection cycle. That will make gas plentiful for the first part of the month and somewhat harder to find for the second half," he reasoned. Based on that, he feels the May contract will come under selling pressure until April 15-18, when demand for "the physical molecule" kicks in to lift prices.

Another Gulf marketer agreed but took a different path down memory lane. "After the March 1.666 expiration you couldn't give gas away and people were calling for the market to sink to $1.50. But the weather finally kicked in and prices never saw that level. And now prices are strong and everyone seems short gas. I look for April to give us a roller coaster ride full of both higher and lower prices."

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