Following a small rebound in values on Friday, April natural gas futures on Monday resumed the recent downtrend, notching a low of $4.036 before closing out the regular session at $4.079, down 9 cents from Friday’s finish.

With temperatures warming up nationwide and the potential for the season’s first storage injection to be revealed in Thursday’s report for the week ending March 19, traders and analysts don’t see many market factors capable of hedging the price slide.

“The natural gas market is renewing its intermediate-term probe of the downside on declining seasonal demand, with updated temperature forecasts still pointing to an early start to the storage injection season,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “Net withdrawals most often continue through the end of March, but it looks as though we’ll see the first build this year for the week ended March 19.”

Evans said he sees prices continuing to press the downside. “Unless the market simply uncovers some value-motivated bargain hunting at the lowest levels, we think it would take a significant cold snap in order to induce much in the way of short-covering,” he said. “At the moment, there just doesn’t seem to be a credible bullish threat, leaving the market free to grind lower much as it has over the past month.”

Some traders see the market as well supplied and anticipate not only a price correction but the loss of overly leveraged producers. They believe the natural gas market is due for a shakeout of highly leveraged exploration and production (E&P) companies that are most at risk for lower prices. “The gas market is stuck between a rock and a hard spot,” said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. DeVooght expects the gas market to go “through a correction at this time. There are quite a few leveraged E&P companies that will not be around in the future.”

Traders concerned with the directional aspects of the natural gas futures market and not offsetting a physical position overwhelmingly favored the short side of the market, according to government reports. For the week ended March 16 the Commodity Futures Trading Commission reported in its weekly Commitments of Traders Report that at IntercontinentalExchange long futures and options (2,500 MMBtu per contract) rose by 1,872 to 607,322 and shorts fell by 2,194 contracts. At the New York Mercantile Exchange long positions (10,000 MMBtu per contract) rose by 2,400 and shorts increased by 14,810. When adjusted for contract size (10,000 MMBtu per contract), longs at both exchanges increased 2,868 but shorts rose by 14,261. For the five trading days ended March 16 April futures fell 16.9 cents to $4.347.

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