After starting out Monday below Friday’s low, May natural gas futures zigzagged during the session between $7.17 and $7.32, unsure of their next move. However, the prompt month did settle 6.7 cents higher at $7.309, just shy of the day’s high.

“It was actually a very quiet market [Monday] up until the end there,” said Steve Blair of Rafferty Technical Research in New York. “For the most part, natural gas futures came right down to our support levels of $7.18, and now we have bounced and settled up near $7.31.”

As for resistance, Blair said he sees minor resistance at $7.34 and major resistance up at $7.50. He added that as of right now he is not “totally convinced” that the market will get through $7.50.

As for the symbiotic relationship between natural gas futures prices and petroleum futures prices, the contracts do appear to still be moving in the same general direction. On Monday, May crude and May gasoline rose by 39 cents and 1.32 cents to settle at $53.71/bbl and $1.5498/gallon, respectively. However, heating oil lost a little over a cent on the session to settle at $1.4871/gallon.

“The natural gas market to a certain degree has shown a little bit of independence over the last two weeks,” Blair said. “It did not break down in a really big way when petroleum did on Thursday and Friday. While May natural gas came down, it wasn’t anything nearly as dramatic as the petroleum complex’s plunge.”

Despite the failure by natural gas to match petroleum’s slide, Blair said a relationship is still evident. “I think there is definitely a little bit of a tie in there from a psychological point of view,” he said, noting it will be difficult for natural gas to really break down unless heating oil goes lower in a big way.

Weakening global demand for petroleum may pressure both petroleum and natural gas prices as indications arise that high prices are affecting consumer spending and production. Initial indications are coming from Europe where industrial production in France, the continent’s third-largest economy, unexpectedly declined in February, as rising oil costs crimped spending by companies and consumers.

According to an increasing number of economists, U.S. growth is expected to decline. A Bloomberg survey predicted that the U.S. economy would grow at a 3.5% annual rate during the second half of 2005, down from 3.7% predicted in March. The survey was conducted between April 1 and April 7.

Fundamental analysts see a weak case for current levels of natural gas. “The May futures closing price Friday of $7.242 is quite high when viewed relative to 1% New York Harbor residual fuel,” said Stephen Smith of Stephen Smith Energy Associates.

“The MMBtu spread between residual fuel and natural gas last year was approximately $1.75 and there was a smaller surplus. This year the surplus is greater and the spread has narrowed to about $1.40, so directionally the relationship between the two is correct. There is a weaker spread with a bigger surplus,” he said.

Smith pointed out that the average for the spread the last couple of years (excluding November and December) tended to be $1.30. The reason for excluding November and December was because “all the anticipation of the winter season” was incorporated in the market at that time.

Recent DOE data shows New York Harbor residual fuel at $84.61 cents per gallon or $5.73 per MMBtu. If Smith’s analysis is correct, natural gas futures should trade at $7.03.

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