April natural gas futures kept to a tight 15.5-cent range Tuesday before closing 9 cents higher at $9.419 as traders mulled supply concerns, weather uncertainties and the potential impact of a U.S. economic recession.

After trading at more than $10 and at less than $9 in just four sessions, prompt-month natural gas looked to be finding some middle ground on Tuesday with its $9.280 to $9.435 range. After going in opposite directions on Monday, natural gas futures once again aligned direction with May crude, which settled 36 cents higher Tuesday at $101.22/bbl.

“It was pretty quiet on Tuesday as far as natural gas futures were concerned,” said a Washington, DC-based broker. “The dollar was selling off again and gold and crude futures both came up, so I think we will have to watch and see whether the connections between commodities is on the way back.”

Rafferty Technical Research broker Steve Blair added that he thinks “the tops” have been seen in natural gas futures. “Looking at the open interest numbers and everything else, I think the drop under $10 last week really showed some fund liquidation going on,” he said. “We got under $9, but I was not surprised to see the market bounce back from there. I think some of these long funds could possibly be putting some length back on in here. We still have some uncertainty about the weather going forward over the next couple of weeks. On Monday the National Oceanographic and Atmospheric Administration’s six- to 10-day forecast showed above normals all over the place, but the eight- to 14-day outlook had below normals along the entire eastern coast, so there is some flip-flopping going on.”

Looking at the next couple of months, Blair said, “I think we have probably seen the top and the bottom of the market already. I wouldn’t be surprised to see futures get down back to the $8 to $8.500 trading area as we get into the shoulder season. I really think we have seen the highs and lows until we get into the summer…unless of course we get an early summer.”

Some market-watchers see storage shortfalls requiring higher prices to attract additional supplies. Analysts have put pencil to paper and look for the end of supply surpluses. “We look for an approximate supply trough at the beginning of the second quarter to be established roughly 5% below levels that we view as normal,” said Jim Ritterbusch of Ritterbusch and Associates. He sees the injection process as becoming much more “arduous” and says “the economic principle of high prices attracting needed supply to the market is likely to be validated.”

Ritterbusch also contends that any significant increase in production during the second and third quarters is not likely, and “additional product will be required from Canadian and LNG [liquefied natural gas] imports if a comfortable supply base is to be established ahead of next fall’s heating season.”

Imports or not, in Monday’s trading it was noted that April futures recorded a stout advance of 26.4 cents to settle at $9.329 without any prompting from the petroleum complex. May crude oil fell 98 cents on Monday to $100.86.

“There was interest in buying the May outright along with rolling long positions from April to May,” said a New York floor trader. How much longer that buying may persist is another question. “There is pretty strong resistance above $10. I think we are in a $9 to $9.50 trading range.”

©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.