A Nor’easter dumped snow from D.C. to Boston yesterday, fuelingthe bullish momentum in the gas futures pit. It also forced Nymexto close up shop an hour early and plan for a one-hour delayedopening today.

Gas futures got off to a roaring start with the near-monthcontract making gains of 20 cents or more. But April ran intotrouble by mid-day, hitting a wave of selling in the low $5.40s,while the summer and winter months tried to hold their gains. TheApril contract ended the regular session with a 6.6-cent gain at$5.336/MMBtu. It hit a high of $5.430 and a low of $5.300.

“We were warning the people on that last sell-off to startmoving on the summer strip and to get something done on the winterstrip too,” said one futures broker. “I think we’re a little aheadof ourselves in the short term. I’ve got scale-up selling by tradetoo. I think in the short term it’s getting overdone and I thinkyou can expect it to set back a little bit. But Friday’s highshould offer pretty good support in the $5.20s. The buying is stillunder that summer strip, so I just don’t see the summer monthsweakening up that much at all.”

Another observer agreed the market could trade sideways for aperiod. “There’s one of two ways we can work off this oversoldmarket. Obviously if you rally, that would work it off, but youalso could go sideways for a while, and that may be what it’splanning to do until we get a handle on storage and refill ofstorage.”

However, this week’s AGA storage report could pack a wallop.Many observers are expecting 70-100 Bcf of gas to be withdrawn,which would easily beat the 37 Bcf withdrawal reported during thesame week last year. “If we get another big draw on storage, Ithink the end-users are going to get a little nervous.” theobserver added.

Susannah Hardesty of Energy Research & Trading said sheexpects this week’s storage withdrawal figure to be similar to lastweek’s — around 100 Bcf. “This will definitely put our finalprojected inventory levels closer to 600 Bcf than 700 Bcf.”

Hardesty said she expects prices to continue strengtheningthroughout the week “perhaps and most likely throughout the month.Initially, there is resistance around $5.450, which could holdprices for the short term. Short-term support is at $5.300 to amaximum downside of $5.200.”

She also noted that the historical trend is for April futures tomove higher through the month and “most likely have finalexpiration near its high for the last month of trading.” Since1991, April futures have traded higher throughout their final monthin every year except 1994. Only once (in 1997) did it settle nearwhere it started the month. Hardesty recommends buying at least 50%of requirements for April-October, and preferably on throughFebruary 2002. Continue to build length, she said, if April pullsback to the mid to low $5.30s, and if April breaks out above$5.450, “begin buying at that time because pullbacks to themid-$5.350s will be less likely.”

The CFTC’s Commitment of Traders report on Friday showednon-commercials shifting to a net long position from being netshort the week prior. The non-commercials also reduced theirholdings in the market slightly. Non-commercials were 53% long asof Feb. 27. Commercials increased their short position during theweek and were 51% short on Feb. 27, according to the CFTC.

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