After Wednesday’s storage-induced sell-off, natural gas futures were mostly quiet Thursday as many traders elected to stay on the sidelines ahead of the holiday weekend. As a result, prices did not stray very much from where they started. A negative open was erased by modest late-morning advances. At the closing bell the bears won it by a nose, with the May contract closing 0.4 cents lower at $5.381. In observance of Good Friday, there was no Access trading Thursday evening and no trading on Friday. The market will reopen on Sunday at 7 p.m.

Will little price action to speak of on Friday, traders were forced to take a look back at the entire week to get a feel for what the market did and didn’t do. Not only was Thursday’s close down from the Friday before, creating a down tick on the weekly chart, it was also near the bottom of last week’s trading range, noted Tom Saal of Miami-based Pioneer Futures. “I wouldn’t be surprised to see the market test the $5.30 level on Monday. When you settle so close to either the top or bottom of the weekly range, it is a good bet that traders will press the market to that point early the following week,” he added.

However, in the intermediate to long term, Saal remains bullish for other technical reasons. “The longer the market moves horizontally, the greater the chance it has of reversing [to the upside]. We have consolidated between $4.87 and $5.74 for 8 weeks now. The last time the market moved sideways for this long was the six weeks it spent near the $7.20 to $10.10 top. We saw how the market reversed that time [lower].”

On the fundamental side of the price equation, the water is still a little murky, however. Storage injections have only just begun and traders are eager to see if they can spot a trend forming. While the oft-quoted year-on-year deficit was trimmed only slightly last week (from 404 to 392 Bcf), there is a good chance that a more significant trimming could occur this week. The American Gas Association likely will announce another modest injection, which would contrast favorably (for bears) against a 25 Bcf net withdrawal last year at this time. Alternatively, if the rate of injections this spring is unable to keep pace with the rate of injections last spring, causing the deficit to widen, traders agree we will have quite a bull market on our hands. Only time will tell.

The other fundamental variable is the weather. While Salomon Smith Barney (see Daily GPI, April 6) and the National Weather Service have weighed in with their forecasts calling for a normal to slightly warmer-than-normal summer, the market waits for proof. Those in the Southeastern U.S. got a preview of things to come when the mercury rose to the 90 degree mark in places like Atlanta, Charlotte and Washington, D.C. early in the week. Prices responded accordingly, spiking to the $5.62 level in May futures. “Traders love to extrapolate. If its 90 degrees in early April, it could be 115 degrees in July and August,” a Houston risk manager half-joked.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.