Prompted by weaker physical prices and forecasts calling forwarming temperatures this week, traders in the natural gas pit atNymex had little choice but to push futures lower Friday as theycasually transferred long positions from the prompt contract to theback months. Slipping 6.6 cents on the day to finish at $2.785, theApril contract now sits just above trendline support on the dailychart, sources said.

After failing to punch through stubborn resistance in the$2.88-90 area last week, many traders anticipated prices softeninginto the weekend. Even a fast-moving cold front late last week inkey Midwest and Eastern consuming centers was unable to avert theprice slide. In fact, weather forecasts actually contributed to theprice erosion thanks to a National Weather Service report thatpredicted temperatures will warm up considerably across much of thenation by midweek. According to the NWS six- to 10-day forecastreleased Friday, almost the entire country is expected to seeabove- and much-above normal temperatures, while more normalreadings are forecast for the West Coast and below normaltemperatures are confined to the Southeast.

However, the weather was not the only negative feature Friday. AHouston-based risk manager, who has been bullish for the lastcouple months, believes the dynamics that have lifted prices offthe $2.125 January bottom are beginning to change. “We have stalledout up here. You can make the case that this is a $2.75-85 marketwith a couple of false breakouts to either side. We are forming anice consolidation area and just need a sustained breakout to giveus our next direction,” he said.

In his opinion that breakout could come early this week asspeculators continue to unload April positions ahead of the March29 expiry. Another factor, which could turn in bears’ favor, is theTuesday expiration of crude oil futures. “Heading into the OPECmeeting March 27, you would have to be a fool to be long crude, soyou could see some pre-expiration long liquidation early thisweek,” he said.

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