Trading a slim 12-cent range on Friday, May natural gas futures ended up dropping 11.1 cents to close at $7.381, which is 42 cents lower than the previous Friday's close. With a number of market experts still calling futures range-bound, much of the banter Friday was on the "errant" trade Thursday during the storage report's release.

Some traders were delighted and other were horrified Thursday as their screens suddenly registered a 20-cent drop in May futures to $7.250 as the Energy Information Administration (EIA) announced a modestly bullish 46 Bcf withdrawal from underground storage facilities. The trade was entered electronically, and floor traders had no idea where the it came from. Since the trade came in through the Globex system, only electronic traders were immediately aware of it, sources close to the situation said. In any event, the market proved resilient to the dip and prices snapped right back up.

"The errant trade hit the market at a time when there were not a lot of bids," noted Tim Evans, an analyst at Citigroup in New York. "People wanted to see the storage number before they bought anything, so there weren't a lot of bids under the market. I don't know who might have been doing the selling or whether they were trying to paint a picture like they knew something or whether it was a case of trader error."

One floor trader said that as the EIA number was released a trader sold the May Globex down to $7.25, and then it bounced right back. "Someone made a keypunch error or something like that," he said. He speculated that a trader may have mistook the EIA report of a 46 Bcf draw for a build, and "it wasn't just a small trade. If you want to move natural gas 20 cents you need some size to do it," he said.

An East Coast broker noted that in situations like that there are always winners and losers. "One person I spoke to had a fair amount of resting buy-orders under the market, which got filled in that downdraft just prior to the storage report's release," the broker said. "Twenty minutes later they had themselves a profit of $100,000, which they dumped right back into positions. Anybody who had some scaled-down buying in place would have had a windfall. Someone who got stopped out of a long position on the lows would have been crying."

Looking ahead, some market participants said the week's price drop likely means the bulls have been corralled for a couple of weeks at least, until some late spring heat is able to spread across the country. "We just don't have the weather right now to insert a floor under this price. Now, that does not necessarily mean that we are going to completely fall out of bed here. With summer right around the corner, I wouldn't count on this market remaining bearish for more than two or three weeks," said Evans. "We've had this pattern where February was cold, March was warm and April was cold again. It looks like May will at least start out warm, but there is no real consistent picture.

In the near-term weather picture, natural gas support level prices may soon be tested because of expanding warmth into Midwest energy markets. MDA EarthSat in its Friday morning 11- to 15-day forecast expects "warming to continue to expand eastward with Chicago now under the canopy of above-normal temperatures for this period." The forecaster added that there is still a seasonal-to-cool leaning on the Eastern Seaboard, but based on the progression, some warming should reach this area in early May.

In technicals terms, the market has been described as being in a sideways chop for 10 weeks or so, which makes it hard to say when that will change. "Trying to trade or analyze this market in real-time has not been easy," Evans added. "Over the past few months it has not been an easy task to stay on the right side of this thing. I'm sure the folks who focus on 30-minute bar charts have had sufficient fun, but on a longer term timeframe it really hasn't been an easy trade."

The analyst said he currently expects lower prices. "We see the market slipping back toward the $6.80-7.00 area, where there may be better buying interest," Evans said. "At some point we do see the funds as being interested in taking profits and eventually accumulating length, given the longer-term outlook for a hot, stormy summer."

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