Despite a late selloff in the nearby crude oil pit, natural gas futures held yesterday as traders continued to cover shorts amid modestly constructive technicals and bullish expectations ahead of today’s storage report. With that the March contract made it five in a row Tuesday, as it posted a 1.9-cent gain to close at $2.305. By contrast, March crude gave back half of Monday’s $1.15 advance to finish at $20.73 a barrel.

Several traders were impressed by the market’s ability to resist a downturn yesterday after the early buying petered out and crude succumbed to profit taking. “It is unusual for a market to move so methodically like this,” a cash trader said. “Typically, you see a few days of advances and then a retracement. For a moment it looked like today was going to be one of those days, but the buyers stepped up.”

One possible explanation for the strength in futures prices was the willingness on the part of cash prices to keep pace and even surpass in many cases Monday’s futures gains. NGI’s Henry Hub cash price leap-frogged March futures Tuesday by advancing 18 cents to average $2.39.

Looking ahead, traders will receive a dose of fresh fundamental data this afternoon when the American Gas Association releases fresh storage data. Expectations ahead of that report call for a withdrawal between 120-150 Bcf, which if realized will easily eclipse last week’s 82 Bcf pull as well as last year’s 95 Bcf drawdown. Looking further out on the horizon, Tim Evans of IFR Pegasus in New York believes that next week’s report also will feature potentially bullish data as the withdrawal figure will likely exceed the 81 Bcf year-on-year comparison. “This gives the market at least a modest basis for an intermediate-term rally, even though total storage remains quite high and winter won’t last that much longer.

“March futures tagged projected resistance at $2.34 and appeared to have been capped for the moment. The market may consolidate now, while it assesses whether a full test of the $2.41-444 highs of Jan. 17 (continuation chart) can be successfully challenged,” Evans wrote in a daily note to clients.

Meanwhile, Tom Saal eyes a potential “flashpoint” at March’s 40-day moving average of $2.346. A move above that level could trigger a rally led by professional speculators seeking to unload a record-setting level of short positions.

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