May natural gas futures continued to advance Monday in active trading on the New York Mercantile Exchange. Short-term traders noted continued upward momentum carrying over from Friday’s gains, and expect the market to work towards higher price objectives. May finished the day up 14.6 cents to $10.733 and June added 16.9 cents to $10.874. May crude oil gained 79 cents to $117.48/bbl, a record close, on geopolitical developments and a weaker dollar.

“It just feels like the momentum is on the buy side; I was looking at $10.85 to $10.90 and maybe this market trades up to $11.25,” said a New York floor trader.

Fundamental traders see a demand-driven market. “Overall we have a big picture fundamental view,” said a Houston bank analyst. “Unless you see weakening demand, prices just keep on going [higher]. People are expecting weakening demand from a slowdown in the economy, but so far you are not seeing it. Industrial production data came out last week and it was anticipated to be down 0.1% but it came out up 0.3%,” he said.

On Wednesday last week the Commerce Department not only reported higher than anticipated industrial production, but also higher capacity utilization. Analysts were expecting capacity utilization of 80.3%, but the actual figure came in at 80.5%.

Oil and Liquefied Natural Gas (LNG) also play into the analyst’s assessment. “Residual fuel is $12.80 to $12.90/MMBtu, and that is a moving target as well. If natural gas were to advance to $11.50, crude oil could stay still, but it is likely to move also. If LNG imports were to come in, that would definitely be a bearish factor, but until I see it, you can’t really count on it.”

According to the analyst, a seemingly robust supply side of the equation may not be what it seems. “We went through all the [supply] factors, stronger Canadian imports, improved U.S. production, and it just didn’t add up. There was still a shortage of gas. When you factor in the Canadian supplies coming in a little stronger than anticipated, production coming in very strong, no change in exports, LNG supplies down, residential, commercial, and industrial demand, power generating demand, and net net on a daily basis, you are going to ask where is the gas coming from.”

“From a big picture standpoint [the] natural gas [price] is where it should be,” he said.

Prior to Monday’s advance analysts using Elliott Wave and retracement techniques were looking for higher prices as well. “Friday’s rally to new highs on the move and a new high close was clearly not the stuff of peaking action,” said Walter Zimmerman of United Energy. He is looking at three high-probability target zones, all higher. “Our most bearish case from here is a peak into the $10.695-10.745 zone. Any next step up from there should be able to reach a cluster of wave count objectives into the $10.840-10.935-10.965. He added that his most bullish case had spot futures trading up to the $11.300 to $11.550 area.

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