After funneling lower for most of the week, natural gas futures finished on a positive note Friday, amid a late flurry of trading and speculative short-covering. Just when it appeared that futures would head listlessly into the weekend with its fourth straight down day, the market erupted higher in the last 85 minutes of trading, propelling the May contract to a 2.7-cent gain at $5.128.

Some might say bulls were patient last week — that they waited until the last minute to exert their influence. And while that is a true account of what took place Friday, a more plausible explanation is end-of-week short-covering. And why not? Since etching a $5.55 high on Monday, futures have descended with varying degrees of velocity. A gap lower open Tuesday, followed by a storage-related sell-off Wednesday delivered most of the damage. On Thursday the markets slipped lower again, but failed to fall beneath psychological support at $5.00. Then again on Friday bears proved they were unable to press the downside. A rally was imminent.

According to Ed Kennedy of Miami-based Pioneer Futures, several large marketing companies were responsible for initiating the push higher Friday. Starting about 1:45 p.m. (EST) waves of front-month and strip buying entered the market from trade groups. Once the rally was set in motion, it didn’t take long for the funds to join in, he said.

While the late uptick put the market back in bulls’ control heading into this week, additional gains will not come easy. Storage remains an obvious hurdle for bulls, who will likely see this week’s storage number surpass not only last year’s 19 Bcf injection, but also the 26 Bcf historical refill. Traders are eager to see if last week’s draw was an anomaly or just the healthy beginning of a bearish storage refill season.

According to the American Gas Association, a whopping 64 Bcf was injected into underground storage facilities during the week ending April 13, bringing working gas levels to 21% full at 705 Bcf. The injection figure exceeded even the most ambitious of refill estimates, which ranged as high as 50 Bcf, and greatly surpassed the 14 Bcf injection reported last week as well as last year’s 25 Bcf refill. Over the past two weeks, the year-on-year storage deficit has shrunk 25% from 404 Bcf to 303 Bcf, giving traders confidence that the storage situation may not be as dire as it was once thought to be.

Admitting that the market’s inability to move higher is frustrating, Susannah Hardesty of Indiana-based Energy Research and Trading is convinced that prices will eventually move higher. To support this assertion, she points to similar sideways trading bands in history. “Currently, prices have been trading in a range from $4.92 to $5.63 for 42 days. From support to resistance, this band marks a 15% trading range. Since 1993 there have been seven prior times when prices have been caught in a sideways consolidation band, with a 10% to 15% range which has lasted for 34 or more trading days. The longest sideways band lasted for 56 trading days….. In six out of seven times when this sideways band was complete, prices moved higher, to the final peak of the next seasonal high,” she said.

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