In a variation of the springtime weather idiom, it was the April futures contract that came in like a lion this year. Following March’s lamb-like behavior as prompt contract, trading roared back to life Thursday and Friday as buyers bid up April futures on the bullish combination of storage and technicals.

At $5.416, April finished the week up 2.5 cents for Friday’s session, up 24 cents for the week, and 26.6 cents above the final resting place of the March contract.

Traders polled by NGI agreed that the bulls remained in control Friday following some very supportive storage news released Thursday. According to the Energy Information Administration, 164 Bcf was pulled from storage during the week ending Feb. 20, dropping inventories to 1,267 Bcf. Not only was the withdrawal deemed bullish versus the year-ago and five-year average volumes of 154 Bcf and 97 Bcf respectively, it also was supportive versus the common 140-154 Bcf range of expectations.

Storage now stands 253 Bcf above the year-ago level, down from a 263 Bcf surplus a week ago. Versus the five-year average, this year’s storage level is in a deficit situation, having reversed from a 163 Bcf surplus to a 163 Bcf shortfall over the past four weeks.

“Over the past three weeks, withdrawals have averaged 6 Bcf per week stronger than expected,” said Tom Driscoll of Lehman Brothers in New York. “If this trend continues for the remaining five weeks of winter, we would lower our end of season storage estimate by 30 Bcf to 920 Bcf… It is likely that the recent softening in gas prices has led some consumers to increase natural gas demand,” he wrote in a note to customers Thursday.

However, Driscoll is quick to note that he is sticking with his 950 Bcf ending inventory figure and looks for the market to again turn lower. “Our full year 2004 price estimate remains $5.00.”

He is not the only market-watcher donning a bear coat. “This was a good rally, don’t get me wrong, but we still see it as reflexive or corrective rather than a change in the larger trend,” a Washington DC-based broker said. “Take storage for example; the withdrawal was large, but we believe it was more a function of conformance with storage contracts than actual gas demand.”

Looking ahead, he maintains a downside target in the $4.60-80 area, which forms the base from which the market sprung higher late last year. “We consolidated in that area for quite some time in the fall. We spent nearly the entire month of November in the $4.60-80 range.” On the upside, he uses a similar method for identifying resistance. “The market fell hard until it reached $6.20. Since then, it has been a slow, methodical retreat,” he said, noting that he remains bearish unless the market breaks above the $6.00-20 level.

Other market participants do not give the market that much slack to the upside. Specifically, George Leide of Rafferty Technical Research in New York points to a prominent technical feature suggesting the market is close to a key level of resistance. “We have a head and shoulders top on the April chart. As long as we do not break above [the neckline] at $5.51, this remains a bearish pattern.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.