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May Futures Break Resistance, Move to 6-Month Highs

May Futures Break Resistance, Move to 6-Month Highs

Feeding off momentum gained in both the regular and access trading sessions Wednesday, the futures market muscled higher yesterday as the May contract notched its highest price since last November. After gapping higher to open at $2.215, May traded mostly sideways Thursday morning before an early afternoon buying surge mapped out yesterday's high price at $2.23. The contract finished just off that level at $2.225, a 5.1-cent advance on the day.

Sources agreed that a smaller than expected storage figure released by the American Gas Association Wednesday night was the impetus needed to propel the market above its recent trading range. Prior to yesterday the May contract was locked between the $2.075 and $2.19 for 7 trading sessions.

However, a Gulf Coast trader thinks strong pricing in the April cash market has been silently supporting the May futures price. "Lately, there seems to be someone willing to bid the Henry Hub a penny above the Nymex print. In a forward injection market, there is no reason for spot cash prices to be at a premium to the futures and so May has been playing catch up." NGI's Daily average for the Henry Hub was today was $2.25. He continued, noting that whereas most Gulf trading points trended lower in late morning business, the Henry Hub moved higher. "Looks as if someone is buying physical and sticking it in the ground in the hopes it will buoy the futures market," he speculated.

Now that prices have entered a new trading range, how much higher will they go? As always opinions are mixed, but the market will receive some potentially telling data this afternoon when the bi-weekly Commitments of Traders report is released. The last report with data as of April 6, showed that non-commercial traders were net long over 15,000 positions. But a Houston trader thinks that figure has swollen to around 36,000 since then, which would help to explain the simultaneous rise in prices. The May futures close on April 6 was $2.013, more than 20 cents below current levels.

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