Following three days when trading volume at the New YorkMercantile Exchange averaged 117,518 contracts, the May contractgained a mere 1.4 cents to $2.342 amid a session when “only” 74,378contracts changed hands. Sources said much of the activity onFriday was simply position covering ahead of both the weekend andthe expiration of the May contract this Tuesday.

While no one knows for sure where May will settle, aHouston-based marketer doesn’t think it will be much lower thanwhere it already is. “I’d say there is major support to this thingat $2.28. In fact, I think we’re at the bottom of the trading rangefor the next four months. LDCs had the chance to do a $2.35 spreadfrom April through October and didn’t do it, and prices ran up to$2.55-60. They won’t want to get burned a second time in a row,” hesaid.

He followed with an even stronger prediction: “This area willturn out to be the lowest prices of the year. You’ve got some solidinjections for the next two months, and even though May is ashoulder month and nukes are coming on line the 15th, I stillexpect demand to be strong enough to drive cash prices to $2.55,”he said.

In the short run, the futures strip could by buoyed by a pricinganomaly in the physical market. “The last three days of the month,cash-out prices are going to be much higher than they are now.We’re talking at least 10-15 cents higher at least. Nobody seems tobe talking about that, but cash market prices are going to have torise to meet these levels. Since futures are supposed to convergewith cash, and considering how many funds are now out of the Maycontract, it is very likely May has already seen its low trade,” heconcluded.

Futures prices may have received some further bullish news astraders were leaving their offices last Friday. The latestCommitment of Traders report was released Friday evening and showedfor that for the two weeks ended April 21, speculators reducedtheir net long positions by only 649 contracts to a total of34,684. However, the report missed the following two days worth ofactivity, when prices fell nearly a quarter on trading volume whichexceeded 250,000 contracts. “On the [April] 14th, prices fell 15cents and the net long position for speculators fell by roughly6,000 contracts,” a broker told GPI. “Now prices have fallen 23cents from last Tuesday, so I’d say speculators have roughly 9,000fewer net long positions. But even with the huge price drop,speculators are still net long by [an estimated] 26,000 contracts.That tells you something. That tells you speculators are here tostay. I’d expect them to add to their long positions if prices movehigher,” he said.

If prices move in the other direction, however, both May andJune have major long-term trendline support in the $2.22-24 area, atechnician said.

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