A strong cash market and a shift in attention from the bearishsupply situation to the bullish demand forecasts collaboratedThursday to send futures prices spiraling higher. That enabled theDecember contract to move through a couple of key chart levels enroute to its settlement of $2.553. Estimated volume, which has beennotably less than usual this week, registered a respectable 88,159.

Cash prices got off to a fast start yesterday and never lookedback as the first cold weather of the season descended in manygas-sensitive areas of the country. Henry Hub cash prices fortoday’s flow were up 15 cents to $2.24. Sources felt the strongcash prices gave the futures market the incentive it needed tooverlook a larger-than-expected American Gas Association StorageReport released Wednesday afternoon. The 48 Bcf injection broughtthe total working gas in storage to a near-record 3,094 Bcf, just 5Bcf less than 1994.

Ed Kennedy of Miami-based Pioneer Futures views Thursday’s priceswing as a case of the market looking ahead and not behind. “Thestorage situation has already been factored into prices; demand isthe big wildcard in this market. We are in a weather-driven marketright now,” Kennedy continued, explaining that although storage isplentiful, there is probably very little actually coming out of theground. “Many storage operators have restrictions on how soon, andhow much you can pull at the outset of the withdrawal cycle. Plus,the majority of the gas in the ground is owned by utilities whosemain function is to provide reliability of supply. They willtypically meet peaking demand by stepping into the spot market toget them over the first couple of cold waves.”

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