Buoyed by geopolitical tension-induced strength in the petroleum markets, natural gas futures had no choice Monday but to go along for the ride. May natural gas put in a low of $6.680 in morning trade, but spent the rest of the afternoon exploring higher territory. The prompt month settled at $6.882, up 13.9 cents on the day.

Petroleum markets have no shortage of angst-causing situations around the globe. “In addition to Iran, there is also Venezuela and Nigeria that are concerns, so crude really is looking at an awful lot of question marks,” said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami.

May crude settled $1.35 higher Monday at $68.74/bbl, while May heating oil and May unleaded gasoline increased 6.28 cents and 3.24 cents, respectively, to $1.9454/gallon and $2.0092/gallon.

In natural gas, Kennedy said there was some trade buying evident on Monday, meaning nonlocals were active. “That is to be expected because we are trading at the lower end of what is getting to be a very well established trading range from $6.50 to $7.50,” he said. “The trade came in and started doing some buying. The idea seems to be if you are going to be putting gas in storage here, ‘I’ll go out and lock in my prices right now for my storage gas.’ Yeah, but you can turn around and sell January for $11. To that I say, ‘wow, it really pays to inject.'”

Looking at the current range and the market’s comfort level within it, Kennedy said he doesn’t see the market going anywhere in the near future. “The market seems pretty content right now.”

In the longer term, analysts suggest keeping a close eye on the petroleum sector. “There’s always the possibility that the Iranian situation could blow up, and there could be a spillover into natural gas from the petroleum complex,” said Jim Ritterbusch of Ritterbusch and Associates. He said that most of any rise would be psychological, but some fuel switching capabilities exist and that remains the “main bullish hazard” to a continued bearish market outlook over the next several months. “It would take some real hurricanes and weather dynamics to get natural gas moving (higher) on its own. It’s a real tug-of-war between the supply overhang and supply uncertainties. Hurricanes, possible nuclear outages, hot summer weather should keep the winter months above $10,” he predicted.

The Iran situation may not have blown up, but it certainly got a little hotter over the weekend. Natural gas bulls got a boost from the geopolitical front Sunday. According to a story in The Washington Post, the Bush administration is looking at options for military strikes against Iran as a component of a broader strategy of “coercive diplomacy” to exert pressure on Tehran to abandon its alleged nuclear development program, U.S.officials and independent analysts said. President Bush dismissed the newspaper story as “wild speculation.”

It looks like in the short term no attack is likely, and many specialists inside and outside the U.S. government harbor serious doubts about whether an armed response would be effective. Administration officials, however, are preparing for it as a possible option and using the threat “to convince them this is more and more serious,” as a senior official put it.

In natural gas, funds and managed accounts are standing their ground with little change in their substantial short position. The Commodity Futures Trading Commission reported Friday that as of April 4, noncommercials held a net short position of 28,604 (futures only) contracts, only slightly more bearish than the 28,386 net short position held the week earlier.

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