April natural gas futures managed to hold on to Thursday's gains and closed slightly higher Friday, although traders are still thinking prices will eventually head back down to the mid $3 area. By the close of trading April futures had risen 1.0 cent to $4.168 and May had gained 1.2 cents to $4.246. April crude oil shed 35 cents to $101.07/bbl.

"The [EIA withdrawal] number wasn't all that big yesterday [Thursday], and I think you had some traders in the market anticipating a more bearish number, and they all had to cover," said a New York floor trader. He added that Friday's small gain was just the result of traders squaring their books to avoid market exposure over the weekend.

"I don't think the market gets much above $4.34 to $4.35 and then I would look for a pullback, but we could easily come in lower Monday and retreat from there. I don't think there is anything to rally this market and the shorts will win out again and we will head down to $3.60," he said.

The trader suggested that market resistance was now at $4.25 to $4.35, and "we could see some buying down around $3.95 to $4, but my gut tells me we are headed to $3.60," the trader said.

Others see an improved technical picture leading to further gains. "This market rested today after tacking on an impressive 6% price gain yesterday. [Friday's] price action looked like a digestion process that could have been building some momentum for a renewed advance early [this] week," said Jim Ritterbusch of Ritterbusch and Associates. "While constructing a bullish case on fundamental grounds is somewhat difficult, we feel that the technical picture has sufficiently improved via [Thursday's] five-week highs to ignite some additional fund short-covering on even a minor supportive headline."

Thursday's inventory report is given credit for prompting a 22.0-cent advance by the April contract, but some see data that doesn't fit. Analysts at Canaccord Genuity Energy Research, a Toronto-based investment firm, noted that the 56 Bcf pull was "solidly above the consensus expectation range of 40-50 Bcf. The withdrawal appears a bit squirrely to us as it suggests a fairly material week-over-week increase in demand, which runs counter to seasonal trends and defies the 12% week-over-week decline in heating degree days. While this is likely an anomalous data point, it will be important to monitor storage trends relative to expectations over the next several weeks to better gauge whether there has been a meaningful shift in the underlying supply-demand balance."

The maelstrom of global events continues to swirl. For the moment the natural gas market seems able to distance itself from world events, but the situation in Japan is likely to result in huge demand destruction to the world's third largest economy, and events in Libya and the Middle East indicate a likely loss of oil supplies for several months to come.

In the view of some, it is "an epic struggle to try to remain calm and access the plethora of risks. Risks of possible historic proportions unlike any that we have ever seen before," said Phil Flynn of PFGBest in Chicago. "The big question is whether the [financial] market is over-reacting to these risks or whether the level of fear is justified. Many markets were trying to put the nuclear risks in perspective yet comments from the EU Energy Commissioner Guenther Oettinger caused a surge of panic across the entire spectrum of the global market place. Traders ran for cover when he said that, 'the situation at the Japanese reactor is effectively out of control' and 'there could be catastrophic events within the coming hours.' The markets came back quickly after the comments when traders realized that he was not privy to any information that the rest of us were not."

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