Amid concerns over another day of rolling blackouts inCalifornia and buoyed by speculative short covering, natural gasfutures erupted higher Tuesday as traders factored in the chancethat the market has found at least a temporary bottom. The Aprilcontract finished 22.4 cents stronger at $5.287, but even moreimpressive was the buying interest in the out-months, which enabledthe 12-month strip to advance 23.6 cents to close at $5.421.

After eking out a modest gain in overnight Access trading, theApril contract was called to open higher Tuesday. It did, and thebulls were off and running. Although it is often difficult topinpoint exactly who is responsible for the buying and selling,several brokers were quick yesterday to point to non-commercialshort-covering as a source of the buying.

According to the latest Commitments of Traders data releasedFriday by the Commodity Futures Trading Commission, non-commercialtraders were net short more than 9,000 contracts as of March 13.The last time non-commercials were short by that magnitude was theweek ending Jan. 18, 2000 when prices had just begun theirextraordinary rise.

“This was a case of short-covering, pure and simple,” said TomSaal of Miami-based Pioneer Futures, who watched the rally gainvelocity as April pushed above its 18-day moving average at $5.165.”Because they were short, the funds were a group of motivatedbuyers [Tuesday]. Now they are jumping on the [long] bandwagon atwhat could be the bottom.”

However, this market may not have seen the last of the $5.00level, warns Saal, who is cautious that funds can exit those newlyacquired longs just as easily as they got out of their shortpositions. He wouldn’t be surprised if the market retraced lowertoday ahead of fresh storage data. “As long as we are below thedowntrend 2001 line, I cannot be certain we have seen the lows,” hesaid.

As of Tuesday, Trendline 2001 was seen as resistance at $5.33.The slope of the line is approximately 3 cents a day, he added.

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