Buoyed by cool weather in the Northeast, bullish techincals andsupportive cash market prices, natural gas futures rumbled higheryesterday as traders bid up prices in an opening bell buyingfrenzy. After gapping higher at the open, the May contract spikedto a new life-of-contract high during the first hour of trading.From that point the buying waned and prices were left to chopsideways for the remainder of the session. May finished up 8 centsat $3.158.

For Tom Riley of West Virginia-based Riley Natural Gas the mostcompelling feature of yesterday’s market came even before futuresopened, when cash prices showed early strength. Cash is strongdespite the slow rate of storage injections. One would think thatwith the low rate of storage injections, cash prices would comeoff, but that is not the case, he said.

Slow injections (2 Bcf last week reported by the AGA last weekcompared to 30 Bcf a year ago) are only the icing on the cake. Fora more in-depth look at the current supply situation, Riley pointsto the depleted level of underground storage gas, which was reachedduring record warmth this winter in the Northeast. “In thePittsburgh area, which seems to be about the median of degree daysheating, a year ago we were 9.3% warmer than normal. This yearthrough March we were 12.5% above-normal. So here we have a winter,which is over 3% warmer than last winter, but storage levels are300 Bcf less,” he said.

Alternatively, New York-based Pegasus Economic Group believesthe price rally has run its course and prices are reaching a top.”We see selling in the $3.15-16 area, as there doesn’t appear to beenough time left for May to spike to the $3.25 peak last posted inOctober.”

In daily technicals, downside targets exist at the bottom of theaforementioned chart gap down to $3.105 as well as the gap createdlast Thursday between $3.03 and $3.045.

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