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Small Gains Prompt Locals, Producers to Draw Line in Sand
After apparently teasing volatility-loving traders Monday,natural gas futures have returned to the somewhat unspectaculartrading which marred the month of February by chopping lazilysideways for the past two days. Only subtle differences-Tuesday’slate decline vs. Wednesday’s late uptick-were seen asdistinguishing features in an otherwise featureless market. TheApril contract saw the largest gains, notching a 2.7-cent gain tofinish at $1.723 in light to moderate trading Wednesday.
Sources felt the relatively light volume of 37,973 and lowvolatility was because many traders elected to stay on thesidelines ahead of the American Gas Association (AGA) storagereport. “Light short-covering was also at work [Wednesday],” addedEd Kennedy of Miami-based Pioneer Futures. And although the actual128 Bcf withdrawal reported last night by the AGA fell just shy ofhis own 140 Bcf estimate, Kennedy felt withdrawal was stillconstructive. The oft-quoted year-on-year surplus now stands at 361Bcf, trimmed 81 Bcf from last week’s 442 Bcf level.
But Kennedy also warns not to look past technical factors.”There are buy stops at [$1.74-75] and locals could try to push theApril contract through that level.” However, on the other side ofthe coin there are the producers, who he feels would be best servedby selling a shoulder month futures contract [April] trading atalmost a dime premium to March cash. “Locals will often bid acontract up in hopes of hitting [buy] stops. They just have to hopethey have a bigger appetite than the sellers waiting just belowthose levels. [Today] is shaping up to be one of thosetug-of-wars.”
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