Natural gas futures continued their range-bound dance Monday as May natural gas tested the upper limits of the recent $6.65 to $7.65 trading range. After hitting a high of $7.630 late in the afternoon, the prompt month went on to settle at $7.577, up 44.2 cents on the day.

After testing the lower perimeter all last week, natural gas traders on Monday appeared to be ready to see just how strong resistance was to the upside. A renewed wave of strength in the petroleum futures market — sparked by growing supply concerns due to unrest in Nigeria and tension with Iran — was ready to support natural gas as prompt-month crude broke above $70/bbl for the first time since August 2005, when an all-time high of $70.85/bbl was notched in the immediate wake of Hurricane Katrina. On Monday, May crude hit a high of $70.45 before closing at $70.40/bbl, up $1.08 on the day. The $70.40 close is a new all-time high settle.

Some market experts think natural gas still looks comfortable in its recent dollar trading range. “We tested the lower end of the trading range last week at $6.65 and it held,” said Ed Kennedy, a broker with Commercial Brokerage Corp. “Now we are probing the resistance, initially at $7.45 and then $7.65. I don’t see that much has changed. The range is still holding.

“Early warmth expected in a number of regions of the country is also lending support,” he added. “It is supposed to be hot, especially in the central and southern plains in states like Texas, Oklahoma and Kansas. You have to remember there is not that much demand out there. You also have to remember that the natural gas storage situation has not gone away. Current levels are still way ahead of the norm. So it looks like we will continue to test the upper end of the recent trading range.”

Kennedy added that the petroleum sector will continue to play a supporting role for natural gas. “The strength in petroleum futures is still lending support to natural gas as background noise,” he said.

Geopolitical as well as overseas factors continue to agitate petroleum markets. Continuing its refusal to bow to demands from western governments and the United Nations Security Council, Iran said over the weekend that it will continue to enrich uranium for its nuclear program, which it claims is aimed solely at generating power for civilian use.

April is typically not an important weather month, but early indications of warm temperatures may hint at greater than normal use of natural gas for electrical generation this summer. The National Weather Service forecasts that for the week ended April 22, the states of Texas, Oklahoma, Louisiana and Arkansas are expected to realize 66 cooling degree days (CDD), or 43 more than normal. The states of Kentucky, Tennessee, Mississippi and Alabama are expected to endure 25 CDD, or 19 more than normal.

Funds and managed accounts still are willing to push the short side of the natural gas market. The Commodity Futures Trading Commission reported Friday that as of April 11, noncommercials held a net short (futures only) position of 33,214 contracts, up from 28,604 the week before.

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