After gapping lower at the open, natural gas futures tumbled lower for the third day in a row and the sixth out of seven sessions as traders tested the bottom end of the market’s eight-week trading range. However, when the dust had settled and the orders counted at Nymex, it was clear that support had held, leaving traders slightly bullish heading into today’s expiration. On its penultimate day, the May contract closed 9.7 cents lower at $4.981, about 42 cents below where it was when it began its tenure as prompt month.

According to the American Gas Association, 43 Bcf was injected into underground storage facilities last week, boosting working gas levels to 748 Bcf or 23% full. On balance, the 43 Bcf refill was deemed slightly bearish, as it fell in the upper end of the 15-50 Bcf range of expectations. The market reacted accordingly, sending the May contract immediately down to within a penny of its double bottom low at $4.92. From that point, however, the market made a modest rebound into the closing bell.

Traders were quick to point to apprehension ahead of the storage report coupled with options-related futures selling as reasons for the price demise. As reported in NGI’s Daily GPI Wednesday, traders were mindful that the existence of approximately 8,000 $5.00 put options could lead to futures selling if the May contract dipped below the $5.00 level.

However, according to Tom Saal of Miami based Pioneer Futures, those same people that sold May futures to protect their options positions will be the first to buy them back if prices move back above $5.00. That pent-up buying pressure, along with the fact that the market tested but was unable to break beneath support at $4.92, has Saal bullish heading into expiration-day.

“There are some out there that will have you believe that this market has 8 Bcf/d of excess supply due to No. 6 fuel oil switching and new production coming online. If that was the case, wouldn’t we see a year-on-year net 56 Bcf increase going into the ground each week? The numbers don’t add up. Storage injections were not 56 Bcf more last week than they were last year at the same time last year (43 Bcf this year versus 19 Bcf last year)… Fundamentally, this market is neutral right now,” he said.

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