April natural gas futures plunged at the close of trading Friday amidst a flurry of spread trades that sent out bearish vibrations and cast doubt about further gains in the April contract. April futures lost 6.3 cents to close at $3.932, and May dropped 4.9 cents to close at $4.006. April crude oil shed 78 cents to close at $46.25/bbl.

“There was selling in the April contract and the April-May spread popped, which was a little surprising,” said a New York floor trader. He added that “about 2,500 [April-May] spreads traded between 6.90 and 7.5 [cents, with April under] and 1,200 traded at 7.40 [cents], so it looked like someone was a big buyer MOC [market on close] of the April-May spread.”

The trader noted that this was the first time the spread had gotten above 7 cents in a while and it indicated that the April contract might be subject to further selling.

News on the economic front was mixed. The 8:30 a.m. EDT Friday report by the Commerce Department on the January trade balance showed a minus $36 billion, less than December’s figure at minus $39.9 billion, and less than expectations for January at minus $38 billion. The decreasing trade deficit, however, is usually interpreted as a sign of lower consumer spending on foreign goods and an indication that the recession is continuing.

Other factors such as lower imported oil prices can also play a role. At 9:55 a.m. EDT Friday the market got some better news from the Reuters/University of Michigan survey of March consumer sentiment. February’s figure was a low 56.3%, but with continuing job losses, that number was expected to fall to 55%, a sign consistent with the pervasive recession. Instead the actual figure came in at a somewhat better 56.6%. The Dow Jones Industrial Average rose 53 points to 7,223, posting the largest weekly gain since November.

Analysts were not impressed with Friday’s performance. “Lack of upside follow-through following yesterday’s 5-cent pop suggests a market that is not yet ready to accelerate on the upside or even sustain Thursday’s gains,” said Jim Ritterbusch of Ritterbusch and Associates. He noted that industrial demand remained weak and the likelihood loomed of an early finish to the storage withdrawal season. “The process of an expanding year-over-year surplus well into the injection period may require further price discounting,” he said in an afternoon note to clients.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.