Ending a four-session long liquidation sell-off, the natural gas futures market turned higher Wednesday amid a combination of expiration-session short-covering and end-user strip buying. At $5.15, the March contract was up 7.3 cents for the session, but down a crushing 58 cents from its $5.73 debut as prompt contract. At 97,551, estimated volume was fairly light for an expiration day in the gas pit.

While short-covering was definitely a factor in the market’s rebound Wednesday, its was not the only bullish influence. Also at work, market-watchers agreed, was buying by a sector of the market that has been noticeably absent in the $5.00-plus pricing environment. “Sure there was some short-covering, but that’s not what caused the rally,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “The real feature [Wednesday] was the re-emergence of end-user strip buying.”

He may have a point. With prices having remained above the $5.00 mark for the entire winter, many utility buyers have eschewed their purchases in the hopes that prices would come down. For much of February it was believed that the magic number for those buyers to re-enter the market was $5.00, but the market’s behavior Wednesday suggests differently, Kennedy continued.

“The $5.20 was the fairly well advertised average price of gas injected last summer… If you’re a buyer and you see this summer’s strip drop below that level, there is really no reason to wait for the additional 15-20 cents for a sub-$5.00 price…You lock in some of your load.” The seven month summer strip finished at $5.279 Wednesday, up 12.4 cents from $5.155 Tuesday.

Weather played a supporting role in the price increase Wednesday. After having called for an early spring for much of the eastern half of the country just a few days ago, both private and governmental weather forecasters have changed their tune. According to the latest eight- to 14-day outlook released by the National Weather Service Wednesday, below-normal temperatures are forecast from California to the Appalachian mountains for the March 4-10 timeframe. Meanwhile, seasonal temperatures are expected to return to the East Coast, cutting short the warm-up expected to begin this weekend.

Looking ahead to Thursday’s release of fresh storage data, withdrawal expectations are centered on a tight, 140-154 band. If realized a number of that magnitude would nearly match the year-ago draw of 154 Bcf while greatly exceeding the five-year average of 97 Bcf. Last Thursday the EIA said that 172 Bcf was pulled from the ground during the week ending Feb. 13.

While fundamental support may have buoyed the market in the $5.15-20 area, technical support lags back at the psychologically important $5.00 level. More buying is expected in the $4.86-94 area.

©Copyright 2004 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.