After a convincing 7-cent gain to kick off the week, the futuresmarket forged higher yesterday morning amid continuedshort-covering mixed with some fresh buying activity. The Aprilcontract was bumping up against the March 12 high of $1.825 inmid-day trading, but in the afternoon the buying dried up, leavingonly sellers to determine the market direction. The resulting priceslide-7 cents in 45 minutes-send the prompt month spiraling lowerto finish at $1.754.

And although that settlement represented only a 1.5-cent declinefrom Monday’s mark, it sent a discouraging message to bulls whothought they had the downtrend cracked. A California marketer waspleasantly surprised, but skeptical nonetheless of the 7-cent rallyMonday. “There was no fundamental change in the market-just someshort covering,” he explained. “It is common at this time of monthfor people to roll prompt month positions into a back month. Itdoesn’t mean they are abandoning their positions, just prolongingthem.” He thinks the $1825 level notched Tuesday will hold as thehigh for the rest of the week, leaving April to press lower,possibly expiring between $1.60-70 next Monday.

But if the market is going to continue lower, it will first haveto get past this week’s American Gas Association storage report tobe released this afternoon. Tim Evans of New York-based PegasusEconometric Group thinks the report could come as somewhat of asurprise. “Actual heating degree days from the National WeatherService for last week prove that it was not as warm as weatherforecasts were expecting. That undercuts some of the risk ofgetting a bearish AGA storage report Wednesday. I look for a drawsomewhere in the 50-80 Bcf range, which would not represent adramatic departure from last year’s 78 Bcf draw.”

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