Expiration day in the natural gas pit had a little something foreveryone Monday. While bears were greeted yesterday morning by alower open that paved the way for declines to the $1.80 level,aggressive afternoon buying put a smile on bull-traders’ faces asit led the April contract back above Friday’s best levels. But whenall the dust had settled and the final settlement price was handeddown from the data room at Nymex, neither bull nor bear could claimthe see-saw battle as a victory or a defeat. April finished downjust 0.2 cents at $1.852 and the May contract echoed that sentimentclosing 0.2 cents lower to $1.883.

A Dallas marketer wasn’t the least bit surprised by the earlymove lower. “We were looking at regression analysis that called forthe market to move back into the $1.70s today, but it looks as ifshort-covering prevented that.”

And although short-covering has been the vehicle to drive pricesout of their winter rut, sources are increasingly pointing to theupcoming storage injection cycle as fuel for the rally. Many feelthat despite the looming 300 Bcf-plus year-on-year surplus,physical demand for storage injections, coupled with attractiveforward-carry arbitrage opportunities will help buoy prices in thenear-term.

But New York-based Pegasus Econometric Group feels this is abull market still in search of a reason, pointing to mild weatherpatterns expected this week. In their Natural Gas Report datedMonday, the group writes the May contract has performed welldespite the “lack of a compelling fundamental story.”

They add that recent congestion in the $1.765-825 area shouldprovide support for May. On the upside, Pegasus targets Friday’shigh of $1.905 ahead of the $1.95-98 level to serve as tiers ofresistance. “There may be more work to do first, but we see themarket as setting up for a breakout above $1.98, leading to a bullrun reminiscent of the one from a year ago.”

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