Market participants cited short-covering and relatively strongcash prices as the main reasons for a 7.4-cent gain turned in bythe March Nymex contract Tuesday. The contract flirted around theminor resistance level of $1.81 for most of the day before settlingslightly higher at $1.818.

“What we saw [Tuesday] was that the market was oversold, whichwas a signal for buyers to come in,” said a New Jersey-basedanalyst. “When the market failed to go below the $1.73 supportlevel on Monday, it created a short- term buy signal, and buyers inturn rallied the contract up to about $1.82.” However, he furtherexplained that traders limited the price run-up to the lower$1.80s, since they are waiting for the AGA storage report to comeout (this evening) before they test major resistance at $1.85. Mostmarket expectations are expecting withdrawals to be in the 80-120Bcf area. “If the storage report comes in at 90-100 Bcf inwithdrawals it will cut a little into the year-on-year storagesurplus, which means there is still a little bit of room for thecontract to move higher without breaking the major resistancetrend-line at $1.85,” the analyst added. The comparable storagereport for last year came in at 102 Bcf of withdrawals.

In addition to short-covering, “cash is very strong right now,which was another reason futures were up [Tuesday],” one tradersaid. Henry Hub cash prices were trading in the upper $1.70sdespite bearish fundamentals out there,” he added.

The trader also pointed out the market experienced a similarsituation last Tuesday, in anticipation of the AGA report. “Thiswas also pretty much the same thing that has been happening overthe past three weeks where short covering propelled futures higherahead of the report.” He added the market might see some moreshort-covering today where the Nymex could go up a few more cents.”But looking back at the past three weeks, we see that as soon asthe AGA numbers come out, they are followed with a sell-off and acorresponding drop in prices,” he added.

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