Pausing to take stock of Thursday’s meteoric rise in April natural gas futures, tuckered-out traders on Friday traded in a slim $9.320 to $9.405 range before pushing the contract to close at $9.366, down 7.7 cents from Thursday’s close but 17.3 cents higher than the previous Friday’s finish.

With prompt-month futures rising $1.626 during the month of February, traders and analysts alike are debating just how high things can go. The $10/MMBtu level — which has not been seen since futures were retreating in January 2006 from the Hurricane Katrina catastrophe — appears to be a strong point of contention.

“Friday’s settle falls between two of our minor support numbers at $9.385 and $9.300, so we will have to see what happens Monday,” said Steve Blair, a broker with Rafferty Technical Research in New York. “I am not surprised that we saw a little bit of a push back downwards to finish the week especially after the cash market in the Northeast dumped on Thursday. The market is kind of wacky right now because the weather forecasts are now changing on a constant basis.

“I believe futures are struggling to find a clear direction from here. The $1 move up over the past week or so is a function of the unexpected cold weather in February that the forecasters weren’t calling for back in January. Natural gas storage has also played a big role here. We started the beginning of the year with storage close to the overly healthy year-ago levels and now we sit well under last year’s level and only 87 Bcf above the five-year average, so I think that gives the bulls some reason for optimism.”

Despite that optimism and the recent push higher, the broker said he didn’t see too much room left to the upside. “I’d be hard-pressed to think that we are going to get to the $10 level here,” Blair said. “I can’t see it happening unless we get some arctic weather that is sustained. Even if we continue to get these cold shots, as long as we continue to get these warm shots every few days I can’t see prices getting up there.”

April natural gas opened lower Friday as the bears attempted to deflect bullish momentum following Thursday’s 38.3-cent price surge. One analyst sees little fundamental reason for higher prices. “Fundamentals in this market are not particularly bullish, especially in view of a 6% storage surplus following a 20% price pop this month,” said Jim Ritterbusch of Ritterbusch and Associates. He did concede that futures have some supportive factors in their favor, such as record high heating oil prices and expectations of lower season-ending natural gas inventories resulting form a colder-than-normal February.

Others are more visceral in their assessment of the market. “The pain is definitely to the long side,” said George Ellis, director, Bank of Montreal in New York. He said the late-afternoon release of the Commitments of Traders report would be interesting to see if the open interest of the noncommercial traders has in fact lowered its hefty net short position, he said. As of Feb.19, noncommercial traders held a large 77,939 contracts (futures only) net short. This large position could be offset with options or over the counter (OTC) instruments, but it nevertheless represents a large short exposure.

Even Thursday’s titanic advance of the April contract to settle at $9.443 was not enough to quench the bullish enthusiasm. “I don’t think there has been enough of a move to blow out all the shorts. You also can’t forget that you have OTC and the physical market. I think the market is short everywhere,” said Ellis.

“Clearly, momentum-wise there is a correlation with crude oil. The energy molecule is getting repriced. You can’t have crude at $100 and expect natural gas to trade down to $5.” He added that with the colder weather coming in and the shorts in the market, it’s tough to justify a sell-off. “I think that’s what we are seeing. Technically the market is very, very strong and I expect it to continue. I am looking for a move to $10 and eventually topping out at $10.750 to $10.800 based on the cycles and retracements I am seeing on my charts.”

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