Rebounding from Thursday’s 21.4-cent freefall following a larger-than-expected storage injection, May natural gas futures on Friday reached a high of $4.099 before closing the regular session at $4.039, up 5.4 cents from Thursday’s finish but 3.1 cents below last week’s close.

Despite having natural gas storage levels that are higher than last year’s level and also the five-year maximum, some industry veterans believe the bear move that began back in early January might have finally run its course.

“What we’re seeing is some choppy trade, but it’s generally higher,” said a Washington, DC-based broker. “Overall, we see this as a corrective phase in the market that might have one more little leg down left in it. I don’t know if we’ll retest that $3.810 low from April 1, but so far we’re making higher lows here. The longer we go on basing the less likely we’ll have another wave lower. At that point it transforms to something different with a little more of a bullish tone taking over the market.

“We’re moderately bullish here, although we are still cautious of one final push to lower price levels. We’ve been telling all of our buyers to get their powder ready because it is going to be time to employ it shortly.”

The broker noted that while a number of market watchers believe the current fundamentals won’t support a bullish move, he is not in that camp. “Industrial demand for gas is not on a freight train higher, but the numbers are trending higher. The demand is certainly not declining. The one fundamental that people regularly misread is that if prices drop enough, producers will be very quick to take rigs right back out of service. They are in too tight of a cash position in terms of their capital expenditures to run rigs at a loss. Sure, the rig count has been moving back up, but that will evaporate quickly if prices fall again.”

On the upside, the broker was targeting resistance at $4.350 and then $4.550. “We’re still a little ways away, but those are the first important numbers for this thing to pop through,” he said.

Following Thursday’s report of a plump 87 Bcf addition to inventories, bullish expectations were put on hold temporarily. “Some guys were hoping that the market would push back up to $4.32, but [Thursday’s] action shows what a rangebound market this is,” said John Woods, vice president at McNamara Options in New York. “You get up to the mid $4.20s and you fail miserably. We still have room to move lower, but I think $3.80 holds this time around. The only thing that is going to break $3.80 or $4.30 is weather.”

Traders were mildly pleased with the 8:30 a.m. EDT Friday release of March housing starts by the Commerce Department. Expectations were that starts would improve to 605,000 annually, up from February’s weather-diminished 575,000, but the actual figure came in at 626,000. Any buoyancy, however, in the beleaguered housing sector will require a reduction in the high number of new and existing homes on the market and fewer foreclosures, traders noted.

Some of the top analysts don’t see the market going anywhere anytime soon. “May futures could remain trapped in a relatively narrow range going into expiration a week after next,” said Jim Ritterbusch of Ritterbusch and Associates. “We have shifted from a bearish to a neutral trading stance and have advised strategies intended to gather option premium. With the temperature factor diminishing in influence, nonweather-related factors such as EG [electricity generation] and industrial demand should come into clearer focus during the next few weeks.”

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