Natural gas bulls finally had reason to show their horns with pride Wednesday as a late rally pushed the April contract north of $7 to settle at $7.160, up 25 cents on the day.
The session was seen as a wake-up call to some following a number of small-range days seen in the natural gas pit. The May contract also took part in the festivities, advancing 24.5 cents to settle at $7.265. Curiously enough much of the advances took place in the waning minutes of floor trading shortly after the 2:15 p.m. EDT release of a key Federal Reserve report on interest rates.
The Federal Reserve held its benchmark interest rate steady Wednesday, saying its "predominant policy concern remains the risk that inflation will fail to moderate as expected." At the end of a two-day meeting the Federal Open Market Committee acknowledged recent data shows both higher inflation and a weaker economy. Missing from the statement was any indication that the Fed might lower interest rates, a development keenly watched by stock market aficionados. The bulls were the winners on the day. The Dow Jones Industrial Average rose 159.42 to 12,447.52.
Losers on the day included some natural gas brokers. "I have so much not going on it is discouraging. My clients are not convinced the market is going higher, and they want to see the outcome of weather forecasts and the May conference on hurricanes. It's a question of no one is doing any thinking and as a result, no trading," said a California broker.
He said he did buy a few $7.25 April call options for speculative accounts "just to take them into next week and see what happens."
"If the market can hold $7.21 it may be ready to move higher. Everybody wants to see how April closes out and then they will be ready for what should be a run to $9 based on good old-fashioned weather," he posited.
One factor drawing traders' attention will be the 10:30 a.m. release of inventory statistics. A Bloomberg survey of 22 analysts revealed a median withdrawal of 3 Bcf for the week ended March 16. The survey ranged from a draw of 2 Bcf to a draw of 15 Bcf. A Fimat broker said he believes the withdrawal season can squeak out one more week. He expects the figures to show a draw of 3 Bcf.
However, some are eyeing an early build. The ICAP derivatives auction held Wednesday afternoon showed an estimated build of 14.5 Bcf. Analysts at Strategic Energy & Economic Research are also looking for a build of 13 Bcf.
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