After hitting its head on a high of $7.630 to begin the week on Monday, May natural gas explored the lower boundaries of its recent range to finish the week Friday. After recording a low of $6.670, the prompt month settled at $6.743, down 22.9 cents on the day and 46.7 cents lower for the week.

“We really tried to see how high we could get earlier in the week with the $7.630 high and now we are checking out the low side,” said Tom Saal, a broker with Commercial Brokerage Corp. in Miami. “I think we are definitely still range-bound here with the lows around $6.500 and the highs around $7.500. So we are really bouncing back and forth in a dollar range until something significant happens.”

“Something significant” to Saal would be early air conditioning loads and the upcoming hurricane season for bulls; and weaker crude oil prices for bears. “Those are the factors that could punch us out to the upside or allow us to drop through the bottom,” he said.

As for the funds, the broker said that while they have been pretty net short over the past couple of months, he doesn’t think they are currently influencing the market very much.

Saal reiterated his previous view that the time is right to implement an options strategy. “With the market kind of going sideways here for the last month or so, the volatility has shrunk dramatically, which provides an opportunity for hedgers to come in and use options. They are fairly cheap right now.

“If you think our range is currently $7.500 to $6.500, then you would buy $7.500 call options and hope they expire worthless. A May $7.500 call will cost you a dime right now. That is pretty cheap insurance if you ask me.”

Market technicians are not optimistic for a bullish case. “The month of April is traditionally the transition month from withdrawals to injections so May futures typically get beat down during the month of April,” noted Walter Zimmerman of United Energy. He added that the May contract has only fallen to a new low on the year once in the last 15 years (2001), but that is always a risk. From the bulls’ perspective, key support is in the $6.80 to $6.70 zone and that is the “must hold” area if the market is to build any kind of base for a rally. “Right now it does not look so good for the bulls,” he said.

Others point to the fact that with such a bearish outlook held by so many, it’s just a matter of time before the market proves them wrong. “With everybody and their dog short, the surprise is to the upside, not the downside,” said Allen Rather, a Texas trading consultant. “I’m still generally thinking we’ll have a contrarian, bullish bias to the market. If you hold near $6.90-7.10, that supports the contrarian view that you’ll have a test of the $8.20 to $8.65 level.” He predicted such gains could come by May, perhaps spurred by heightened fears of supply outages and increased gas-fired generation demand this summer.

The case for a stronger economy and hence higher demand for natural gas got a boost in the form of supportive government economic figures Friday. The Labor Department reported Friday that U.S. nonfarm payrolls rose by a better-than-expected 211,000 in March while the jobless rate fell back to 4.7% from 4.8%. The increase in payrolls was better than the 187,000 anticipated by economists surveyed by MarketWatch.

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