Propelled by forecasts calling for a warmer-than-normal summerand following on the heels of Thursday’s technical rebound, naturalgas futures finished the week on a positive note Friday, ascommercial and speculative traders covered shorts ahead of theweekend. After gapping higher at the open, the April contracttraded quietly for much of the session Friday, finishing 10.8 centsstronger at $5.035.

Sources polled by NGI agreed that newly released weatheroutlooks by the National Weather Service were at the foundation ofthe price rebound. According to the Climate Prediction Center,above-normal temperatures are expected during April across a wideswath of the southern half of the country from coastal Virginia allthe way to Southern California. Meanwhile, below-normaltemperatures are predicted across the Great Lakes region into theUpper Midwest. Further out on the horizon, the CPC expects theabove-normal temperatures to continue through August in thesoutheastern United States, the desert Southwest and Texas. Duringthe latter half of the summer, the West is expected to heat up,with above-normal temperatures expected from Seattle south toArizona.

However, it is probably difficult for many traders to imagine asweltering summer, having just come off of the firstcolder-than-normal winter (based on Dec.-Feb.) since 1993-94 andthe 26th coldest on record in the United States. Accordingly, somemarket watchers predict that the full price reaction to theforecasts for a warm summer will not be felt until the first reallyhot day in Dallas or Houston or New York or Chicago. “When you getthat first 95-degree reading in early May, that is when people aregoing to really start to take notice of the forecast,” an observersaid.

While weather forecasts certainly ushered in the buying thatultimately took prices higher late last week, technicals were notwithout blame. Analysts were impressed with the market’s ability todive below, but ultimately close for the week above key support at$5.00. After having tested sturdy support at $5.00 over the pastcouple weeks, bears at Nymex thought they had the market crackedlast Wednesday as they demoted April prices to a new three and ahalf month low at $4.911. That set up Thursday as the day ofreckoning. Would bears step up the selling pressure and takefutures down to the $4.60 area or would bargain buying arrest thedownward momentum? As it turns out, the buyers were waiting, andafter flirting with a long-term Fibonacci retracement level down to$4.87, the April contract moved higher for the rest of the week.

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