US GAS: Futures Rise 1.7% After Dipping Below $4/MMBtu

(Dow Jones) - Natural gas futures rallied after falling below the mark of $ 4 Monday, gritting traders see the previous slide in six days as a good buying opportunity.
Natural gas for May delivery settled up 6.7 cents, or 1.7%, to $ 4.108 a million British thermal units on the New York Mercantile Exchange.
Earlier Monday, the futures fell below $ 4/MMBtu for the first time since mid-March under pressure "as the mild climate and spring season is limited to depress the gas market," analysts with Tradition Energy, wrote in a note to clients.
But falling below the level of $ 4/MMBtu, seen as an important support level, sparked buying interest and short covering by institutional investors, analyst Jim Ritterbusch of Ritterbusch and Associates told clients. Investors cover shorts, or bets that prices will fall, for the repurchase of securities when they believe that a downward movement in prices is higher.
"It's a rebound, but this is probably a dead cat bounce," said Jason Schenker, an analyst at Prestige Economy in Austin, Texas. He said the low heating demand during the spring season, plus the likely increase of supplies in storage in the coming months will put a lid on price increases.
Declines led to some buying interest from traders who saw the market as relatively cheap, said Ed Kennedy, senior vice president of energy marketing Hencorp Futures INTL. "The only thing the market is bullish in the same price," he said. "We tested the support [about $ 4] and the support is there."
Futures had slipped by 7.9% this month to close on Friday, erasing much of the gain in March, as a cold spell in early spring boosted demand for heating oil.
U.S. inventories emerged from the retreating winter 1579000 million cubic feet, only 0.6% above the five year average. That was a sharp departure from historic highs in November by nearly 10% above average, as a colder winter than usual resulted in significant extra storage.
Inventories typically increase between April and October as securities firms for the heating requirements during the coming winter.
Analysts say the market remains under pressure from the view that gas production in North America will exceed demand this year, with production of shale rock formations to increase. Access to credit and better yields drilling in areas rich in higher-priced crude oil and natural gas liquids producers have helped to finance its dry gas drilling despite low prices.

 
   FUTURES           SETTLEMENT        NET CHANGE 
   Nymex May         $4.108            +6.7c 
   Nymex June        $4.176            +6.9c 
   Nymex July        $4.260            +6.8c 
 
   CASH HUB          RANGE             PREVIOUS DAY 
   Henry Hub         $3.975-$4.14      $3.96-$4.07 
   Transco 65        $4.01-$4.1175     $3.98-$4.08 
   Tex East M3       $4.26-$4.4975     $4.19-$4.37 
   Transco Z6        $4.33-$4.50       $4.29-$4.44 
   SoCal             $4.07-$4.16       $4.01-$4.15 
   El Paso Perm      $3.85-$3.97       $3.78-$3.92 
   El Paso SJ        $3.80-$3.89       $3.76-$3.87 
   Waha              $3.93-$4.02       $3.90-$3.99 
   Katy              $3.975-$4.12      $4.24-$4.33 

(Source: http://online.wsj.com/article/BT-CO-20110411-712837.html)