After breaking through the $6.84 top of its range in Tuesday trading, April natural gas futures on Wednesday showed no signs of retreat. The prompt month carved out a high of $6.973 in the overnight Nymex Access session and started Wednesday’s regular session trading at $6.95.

Despite reaching a low during the regular session of $6.83, the April contract ended up settling at $6.88, up 3.3 cents on the day. The continued strength was attributed to strong cash prices, as well as continued strength from the petroleum futures complex.

“We are still viewing the natural gas futures market above the $6.85 level — on a close basis — as a breakout to the upside,” said Steve Blair of Rafferty Technical Research in New York. “From a technical perspective, we are looking for the next resistance level up around $7.16. From a fundamental perspective, storage says, ‘What are we doing here.'”

Blair added that he believes this market is moving up on technicals as the energy markets have been in a bull pattern. “We did some consolidation between $6.55 and $6.85 and now we have moved to the next level upwards in natural gas,” he said. “We may do a little work down here before we bust through $7. If we do get through that psychological $7 mark, I think we are in for at least another 15-cent ride.”

Despite the latest Department of Energy (DOE) stocks report revealing a larger-than-expected 3.2 million barrels rise for last week, April crude oil futures continued higher Wednesday, settling at $54.77/bbl, up 18 cents. The DOE’s heating oil stocks report showed a decline of 0.8 million barrels for last week, which was on the low end of expectations. April heating oil finished less than a cent higher on the day at $1.5325/gallon.

IFR Energy Services’ Tim Evans said he believes that petroleum futures have had a lot to do with the strength in natural gas. “Natural gas prices were higher Wednesday, supported both by the colder temperatures that have boosted cash prices, but also by the strong performance of the petroleum complex,” Evans said. “However, there has been some profit taking too, ahead of Thursday’s DOE storage report.”

Evans said he anticipates a 120-140 Bcf net withdrawal when the Energy Information Administration (EIA) releases its storage report for the week ended March 4, which is well above the 83 Bcf five-year average pull. “This will take a bite out of the 358 Bcf year-on-five-year-average deficit from a week ago,” he added. “With the weather outlook still supportive, this downsizing of the surplus should help sustain prices.”

Despite the support, Evans said he is not longer-term bullish as a result, since a portion of the surplus looks like it will stick around. He added that any warming trend will likely “hit values hard,” especially once crude oil’s “bubble bursts.”

As to where natural gas futures are headed next, Evans said the fact that April natural gas was unwilling or unable to extend its run following the $6.973 top in the overnight market might suggest a bit of “nervousness about the $7.00 psychological barrier” hovering above it.

“We see a further tranche of selling at the $7.24 channel resistance and the $7.25 high of Nov. 24,” Evans added. “The big picture here, even at those higher levels, would represent an upward correction from October’s $9.20 peak. On the downside, we see the uptrend support at $6.738 as a pivot back toward last week’s $6.55-6.58 floor.”

He noted that this looks like a potential neckline for a head-and-shoulders top if in fact the market does pull back from its current level to create the head.

Not only will the EIA’s natural gas storage report be compared to the 83 Bcf five-year average withdrawal, it will also be sized up against last year’s 51 Bcf pull.

Coming in a little on the high side of expectations, Citigroup’s Kyle Cooper said his final estimation for the report looks for a draw between 138 and 148 Bcf. “A draw in this range would be considered neutral to bullish from a temperature-adjusted standpoint,” he said.

The ICAP-Nymex storage auction from 3 to 4 p.m. (EST) Wednesday — which allows people to hedge their exposure to the storage report — revealed an implied market forecast of a 132.9 Bcf withdrawal.

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