Traders put bearish fundamentals aside yesterday at the New YorkMercantile exchange when short-covering and some constructive dailychart features helped the expiring February contract spike higherin active trading. Estimated volume was high, with 134,852contracts changing hands. But despite February’s dramatic 9.6-centadvance to settle at $1.810, many doubt that the market will beable to hold on to those gains when the March contract makes itsdebut today as the prompt month.

After opening near daily lows, February made modest gains intothe early afternoon as shorts began to exit some of theirpositions. That left the market at the pivotal $1.77 level, whichrepresented the upper end of the chart gap created by Monday’s movelower, a cash trader noted. “Trade was largely responsible for thegap lower on Monday as sellers were probing for the magic $1.695teaser that would have ushered in another wave of selling. But themarket never broke below $1.70, and by [Wednesday] they were forcedto cover in those short positions. Presto, a classic shortsqueeze,” he said. That buying led to a spike in the last hour oftrading yesterday, which propelled February to $1.85 high beforethe close.

But some traders were quick to dismiss the rally last night whenthe market received a double helping of bearish storage and weathernews. Coming too late to have an effect on the freshly expiredFebruary contract, the National Weather Service released what manymarket watchers had expected-a 6- to 10-day weather forecastfeaturing a mostly warmer than normal temperatures. That report wasfollowed by what some believe is a somewhat less than supportivestorage withdrawal number released by the American Gas Association.The AGA reported that for the week ending Jan. 22, only 92 Bcf waspulled out of underground storage facilities. That withdrawal,pales in comparison to last year’s mark of 136, and the 4-yearaverage of 149. Even market expectations, clustered in the 100-140Bcf range were not met. The year-on-year surplus now stands at 416Bcf, an increase from last week’s 372 Bcf.

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