Despite one marketer’s assertion that not too much is happeningin the May bidweek market yet, activity was far from lacking at theNew York Mercantile Exchange Monday. The spot May contract lostanother 7.6 cents to $2.266 yesterday, as traders continue to getout of their May positions before the contract goes off the boardat 3:10 EDT this afternoon. An estimated 93,800 total contractschanged hands.

One analyst believes May could continue to slide lower today,which would be fine with him, “so long as the contract doesn’t fallbelow support at $2.22. If that happens, you could see all kinds ofhell break out. Maybe not with the May contract, since people willbe scrambling to cover positions as it is, but with June. $2.22represent support from the long term trendline. A fall below thatcould lead to a move to $2.15, no problem,” he said.

However, he feels any such potential move would be met withpretty stern buy side support. “Remember last summer? In August,everyone was bemoaning the fact that because there was plenty ofstorage and low demand, prices would go crashing to $1.50. Butevery time the market dipped to the $2.05-10 area, pricesrebounded. The reason was because the overall supply tightness wasdiscounted in these prices. That supply tightness could be evengreater now, considering that year-on-year production was less in1997 than it was in 1996.

“Oh sure, there are those who will point to the current storagebuild, which is as high as it’s been all year and say the markethas a nice little kitty to protect it from demand shocks. But thisamount of storage will likely just keep spot prices from rising toomuch too soon. The production tightness is still out there, andthat should keep a two in front of futures prices for awhile tocome,” he said.

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