April natural gas futures managed to score the largest gain since late January on Tuesday by jumping 21.8 cents to settle at $7.472 in active trading. The gain was the largest the April contract had made since Jan. 30 when it soared 68.3 cents to settle at $7.695.
Although futures have been locked in a relatively tight trading range, traders were cautious about the move signaling any meaningful change of market sentiment.
April finished at the high end of the day's range, just off the $7.490 high. "We made a little run right there at the end of the day. There was good fund-buying in the April contract," said a New York floor trader.
The trader said that he "leaned" toward the interpretation that the funds were buying to close out short positions entered into last week. "I don't think they were getting out of an earlier position last week when they were selling, so it leads me to believe Tuesday's fund buying is to cover those earlier sales," he said.
Traders are scratching their heads trying to figure out the relative lack of volatility in a market known for its rapid advances and declines. In spite of cold weather hammering eastern energy markets, traders noted today's 21 cent advance was rather lackluster.
"In a bullish environment if you had a day like Tuesday with cold weather, the natural gas futures would be up 60 cents," said Walter Zimmerman of United Energy.
He added that the "silver lining" in the lower volatility trading environment is "traders who are actually running a business find the price stability is great. They can forecast their costs and sale prices and although the traders may feel a little hamstrung, the actual producers and users of natural gas are more at ease. The producers of natural gas are quite happy with these prices and the users are delighted that prices are not spiking higher."
The early read on Thursday's Energy Information Administration inventory report for the week ended March 2 calls for a withdrawal of just over 100 Bcf. A Bloomberg survey of 16 analysts revealed a median estimate of 103 Bcf. This will be closely compared to a five-year average withdrawal of 117 Bcf and last year's 97 Bcf pull.
MDA EarthSat in its six-to 10-day and 11-to 15-day forecasts adjusted slightly the timing of a cold front late in the forecast interval. "However, the overall temperature regime is not in dispute for the models as they all continue to display a very warm regime for nearly all of the country with the warmest conditions still centered in the Southwest," it said.
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