After tacking on 17-plus cents to the front-month contract on Friday, natural gas futures bulls did so again on Monday, but some market watchers are not yet ready to classify the gains as a change in market direction. June futures on Monday added 17.9 cents to close out the regular session at $3.725.

Backed by strong general economy indicators and significant Wall Street gains, front-month futures ran up to a $3.730 high before dropping half a penny to close. Futures had not traded that high in the last two weeks.

“Something could be brewing here, but we still haven’t taken out the key price level for confirmation,” said a Washington, DC-based broker. “Four out of the last five sessions have netted gains, but the price action is very reminiscent of what has been going on the last three months. We have a big sell-off, followed by a rally back to the prior price level, but then we can’t get through it and we move lower again. That key price level comes in around $3.850, so we’ll have to see.”

Despite the strength, the broker expressed hesitation in saying that the market has seen the bottom already. “This move higher of the last few days has not been on all-that-great volume,” he said. “If there was exploding open interest behind this thing, I would feel a lot more bullish. Right now it still looks like the patter we have seen a few times before. We most recently saw it in March when we had a big move to the upside over a few sessions, but ended up petering out and collapsing in two days.”

Some traders see abundant supply levels continuing to keep buyers out of the market, but at the same time they sense that the market may be nearing a bottom. “The expectation that there is going to be more than an adequate stock of gas in the future keeps the buyers on the side,” said Mike DeVooght of DEVO Capital, a Colorado-based trading and risk management firm.

“On a trading basis, we increased our long positions slightly,” he said Monday morning. “If we break last week’s lows, we will exit our position and step to the side for speculators.”

The rapid rate of rig laydowns appears to be slowing. One week after 18 U.S. rigs searching for gas were taken out of the equation, Baker Hughes reported Friday that only one more rig was idled for the week ending May 1. The number of natural gas rigs actively searching for gas in the United States stands at 741, down by 732 from a year ago. It’s the lowest rig count since February 2003; spot futures settled at $5.766 on Feb. 1, 2003.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.