April natural gas futures scored a modest gain Friday as traders noted covering of earlier short positions countered by light selling by producers. At the end of the day April futures had risen 4.6 cents to $4.813 and May added 4.8 cents to $4.879. April crude oil gained $1.49 to $79.66/bbl.

A New York floor trader said he was “surprised” at the market’s action Friday. “It looked like when the market traded down to $4.739 prior to open that people were going to completely discount the storm and the black box algorithmic traders were going to continue to sell the market. Instead, what happened was that some of the black box traders who had been short the market prior to the expiration of the March contract decided to cover some positions. Also, there was some light selling by producer hedgers.”

Spread trading was also active. “We saw a lot of interest in buying the April-May spread at 5.8 and 6 cents. A lot of the speculative side of the market is looking to trade that spread [buying May and selling April].” According to the trader’s calculations, there was also good support at 7.1 cents, 7.5 and 8 cents and those could be likely points at which traders would sell their spread positions.

Traders were pleased with the 8:30 a.m. EST release of fourth quarter gross domestic product (GDP) data. The figure gives insight into the economy and hints that industrial demand for natural gas might rise. Analysts had been expecting a gain in GDP of 5.7%, unchanged from January’s estimate, but the figure came in at a slightly higher 5.9%.

“GDP came out a lot better, and if that number is correct, we are starting to see some recovery,” said a Washington, DC, broker. He also said one of his associates went to a client in the trucking business and the client said he had hired 15 full-time employees and now had to hire an additional 14. “We are also seeing improvement in durable goods orders, and next week’s employment numbers should offer further indications of improvement in the economy. If 9.7% unemployment holds, I think it will be seen as a very positive sign.”

Top traders see the April contract continuing to test the pre-expiration lows of the March contract at $4.77. “While we view these lows as vulnerable, we still look for the $4.70 level to hold into next week,” said Jim Ritterbusch of Ritterbusch and Associates. He has suggested that traders “scale-down purchases within the $4.70 to $4.80 area with stop protection below $4.60.”

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