The April Nymex contract took a 5.1 cent hit to $2.241 onTuesday, as speculators continued to sell positions following thespot month’s inability to break above the $2.355 resistance levelon Monday, a source told GPI. Total volume was estimated at 41,490contracts.

Despite the Tuesday falloff, a broker said bullish traders neednot yet panic. “First of all, there is pretty strong technicalsupport in the $2.18-19 area. The long term charts remain oversold,so there should be some built in support in this market, especiallyfrom the fund and local community. Secondly, weather should beslightly below normal for the next week or so, so cash prices inthe Gulf shouldn’t fall much below the first of the month indexesin the low to mid $2.20s. That should also help prevent April fromfalling below support,” he said.

Another trader surmised the situation this way: “El Ni¤o, ElNi¤o, El Ni¤o. That means warmer temperatures, right? We’ve seenthat. But warmer temperatures also mean lower prices. We haven’tseen that. If prices were going to tank, they would have done soalready. The supply/demand picture remains very tight. Productionwas off last year, and there is still a sizable backlog of rigmaintenance work out there. No matter what the temperature, therewill always be a certain amount of base demand in the market. Theproblem is the base supply to meet that base demand is low enoughthat even an abnormally warm winter can’t drive prices into thetoilet,” he said.

If April fails to drop below support at $2.18-19, look forrangebound trading between that bottom level and resistance at$2.355, another trader advised.

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