Buoyed by stronger cash market values and bullish speculationahead of the latest AGA storage report, natural gas futures clawedtheir way off early morning lows yesterday as buyers added to theirsummer long positions. However, that buying pressure was all fornaught because prices came cascading back down late in the session,leaving the April contract with a 4.3-cent loss for the day. Theprompt month settled at $5.236.

Traders contacted by NGI yesterday said that the range ofwithdrawal estimates was narrowed and walked higher throughout theday Wednesday. On Tuesday, market-watchers had almost universallycalled for an 80-110 Bcf draw down, but by early yesterdayafternoon that estimate had been re-centered on a 95-105 Bcffigure, well above the 81 Bcf seen last week or the 74 Bcf seenlast year.

As it turned out, yesterday’s consensus estimates were right onthe money. According to the American Gas Association, 101 Bcf waspulled from the ground last week, leaving storage facilities in theU.S. 26% full at 859 Bcf. Not since April of 1997 has the nation’sstorage coffers been so depleted.

And while the storage number came as no big surprise, themarket’s reaction left a few traders scratching their heads. Afternotching a $5.38 high just moments after the report was released,the April contract spiraled lower during its last hour of trading.

For George Leide of New York-based Rafferty Energy Group, thesell-off was not too much of a concern, however. “As long as Aprilcan stay above $4.98, this market should quietly develop higher.”That said, Leide believes you have to be long at these levels witha protective sell stop placed at $4.95 to limit the downside risk.”This is not going to be a home run trade and we aren’t going tosee a quick move to the upside. Winter is off the board and with itwent some volatility. We are seeing some good buying in July andAugust and as long as support holds in April, this market shouldwork its way higher,” he continued.

On the upside, resistance is seen first at the top of the recentgap lower at $5.44. The next potential stumbling block for bulls isthe downtrend line for April, which decreases at the rate of about4 cents a day and is currently located at $5.587. Higher still is apotential double top formation at $6.12, Leide said.

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