Even as May crude futures ran significantly higher, April natural gas — one day ahead of expiration — traded within a slim 15-cent range in Tuesday’s regular trading session at the New York Mercantile Exchange before closing at $7.214, up 14.7 cents from Monday’s close. May crude increased $1.91 to close at $66.07/bbl.

With natural gas futures seeming to have bottomed out at $6.450 earlier in the month, some market experts think the market is currently comfortable in the $6.50 to $7.50 trading range.

“We got down in the $6.40s earlier in the month and bounced off of it,” said Steve Blair, a broker with Rafferty Technical Research in New York. “It seemed to be a pretty good technical support level. At this point, I think a lot of this bounce has been technical. The market seems to be very comfortable in its current trading range.

“As long as the storage overhang continues near its current surplus, I think the market will remain comfortable with these prices. However, I wouldn’t rule out any blips to the upside, especially if the petroleum futures sector continues to run higher. I think the strength in the petroleum sector is helping to keep natural gas propped up here in the low-$7 area.”

Blair said that with gas supply currently not a concern, the market is keeping its eye on early summer heat and the following hurricane season. “If cooling demand and generation demand comes on early due to heat, it really could eat away at the storage overhang pretty quickly. After that, the concern will shift to the hurricane season, especially as we come off of the overactive 2005 Atlantic season.”

Blair said that while the storage surplus is sizeable, any significant reduction in that surplus could move prices higher. “The current overhang is factored into prices,” he said. “Any reduction in the surplus, especially with Gulf of Mexico production still shutin, could move the futures market higher.”

Following Monday’s session, a top trader said he shifted his stance from bearish to neutral. According to Jim Ritterbusch of Ritterbusch and Associates, the bullish factors of a potential revival of industrial demand, a shift out of the massive short position held by funds and managed accounts, the potential for hot weather to increase incremental demand for electricity generation and the upcoming hurricane season all outweigh current mild weather and record inventory levels.

“We have shifted from a bearish to a neutral trading stance and would view the current standoff between a large storage surplus and forward supply uncertainties as capable of forcing a continued sideways-type trade for several more weeks,” he said.

A shift out of the large net short (futures only) position held by noncommercials may already be in place. The Commodity Futures Trading Commission reported Friday that as of March 21, noncommercials held a net short position of 38,765 contracts, a decrease of more than 3,000 contracts from the 41,773 net short held a week earlier.

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