Amid a devastating combination of weak cash prices andpost-storage-release selling, natural gas futures tunneled lowerWednesday afternoon in a long liquidation frenzy that caught morethan a few traders off guard. After checking to its highest levelin more than a month early in the trading session, the Aprilcontract picked up downward momentum throughout the afternoon tofinish the day at $5.384, or 23.7 cents lower, but 28.7 cents morethan where it was when it began its tenure as prompt month atNymex.

According to the American Gas Association, 12 Bcf was pulledfrom underground storage facilities last week, bringing working gaslevels to 21% full at 676 Bcf. Against nearly all measuring sticks,last week’s withdrawal was bearish as it fell short of bothexpectations (15-39 Bcf) and last year’s draw (28 Bcf). “The tightrange of expectations called for a 20-30 Bcf withdrawal,” said aHouston-based risk manager. “Anything less than 15 Bcf was going tobe bearish.”

However, the market’s fate was not determined by storage numbersalone. While some market-watchers were surprised by theretracement, others had called for the sell-off following afour-day, 35-cent prices rise. For one broker, however, it was notthe magnitude of the price rise, but the extent to which Aprilfutures had distanced itself from cash prices. On Tuesday, Aprilfutures closed at $5.621, more than 23 cents above the March HenryHub price of $5.39.

Looking ahead, weak cash prices may continue to exert a negativeinfluence on futures prices. The first two weeks of April, tradersagree, is the absolute bottom of the shoulder demand period fornatural gas. Storage is nearly empty, but refilling cannot begin inearnest until around the middle of the month. The weather isusually benign, with neither heating nor cooling demand. Inaddition to those factors is the problem that the first of Aprilfalls on a Sunday this year. With that fact in mind, many easternutility buyers, after checking the weather forecast, have electedto wait until next week to decide on their swing supplies, a tradersaid. Meanwhile, these utility buyers who are long baseloadsupplies at a daily index will be net sellers in the market for thefirst 17 days of April. “It is pretty disconcerting when you callyour best customer to sell them gas and they, in turn, offer tosell you gas instead,” he said.

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