With little in the way of fresh fundamental or technicalimpetuous, natural gas futures were quiet in an abbreviatedpre-holiday trading session Friday, giving traders a moment tofocus on the next price move. Just about dead center of its$5.45-67 trading range, the March contract’s $5.568 close was 2.6cents lower for the session and 64.2 cents lower for the week.

Aside from cooler temperatures expected in most regions of thecountry over the weekend, traders had little new information onwhich to trade Friday. Despite dime-plus gains at many cash marketlocations, the futures market slipped lower throughout the morning,only to rebound modestly after cash was finished trading for theday.

Taken as a whole, last week’s price action was hard for bulls tostomach. After gapping lower for the third Monday in a row, Marchprices sifted lower throughout the week to etch a newtwo-and-a-half month low Thursday. At the close Friday the promptmonth was down 10% for the week.

However, for one Chicago trader, each day the market endureswithout plunging dramatically lower is a victory for the bulls. Themonth of March, which is notorious for storage-withdrawal ratchetprovisions, could be the last time for a while there may be muchexcess gas in this market, he continued.

Translation: if prices can’t move lower now, don’t expect it tobecome any easier in a forward-carry month like April.

Tom Saal of Miami-based Pioneer Futures agrees and points to thenarrowing March-April spread as proof. Since reaching a peak of$2.50 back on the last day of December, the differential betweenthe March and April contracts has narrowed to almost nothing as oflate. On Friday, that spread was just four cents. According toSaal, the market will have reached its bottom when prices return tocontango. In order for that to happen the March contract must slipbeneath April, and April must move beneath the summer strip. OnFriday, April finished at $5.528 and the summer strip closed at$5.516.

However, some believe that the market returning to a forwardcarry condition will not alone be enough to arrest the price slide.For Tim Evans of New York-based IFR Pegasus, the storage situationremains bearish, although not as dramatically so as in the past.”We think net withdrawals of 90-100 Bcf are likely again inWednesday’s report, but with a comparison figure of 136 Bcf thedamage to the 363 Bcf year-on-year deficit won’t be all thatsevere. In coming weeks, the comparisons become even easier, withnet withdrawals last year tapering off to 74, 37, and 31 Bcf.”

That said, Evans is cautiously bearish on March futures, fearinga break below last week’s $5.43 low could precipitate a slide to$5.25. Alternatively, he looks to work a $5.66 buy stop as an entryinto the long side of the market for April. If triggered, a sellstop at $5.39 will limit his initial risk.

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