Building on modest gains achieved yesterday morning, the futuresmarket rocketed more than 20 cents higher Wednesday afternoon uponthe release of yet another bullish storage report. Finishing 27.1cents stronger at $4.378, the prompt July contract retraced morethan half of its Monday price slide yesterday and now stands closerto the upper limit of its $3.80-$4.60 trading range.

According to the American Gas Association, 64 Bcf was added tounderground storage facilities last week, bringing the total to1,494 Bcf or 45% full. Sources contacted by NGI were quick toacknowledge the bullishness of yesterday’s injection figure, whichnot only fell short of last year’s 85 Bcf build, but also thesix-year average of 89 Bcf. Preliminary expectations were focusedon a 70-85 Bcf addition.

“Storage players and electric generators are competing for thephysical molecule in Northern California right now and there is nosecret who won the bidding war last week,” noted a westernmarketer. “The West only accounted for 5 Bcf of the 64 Bcf total.It was unseasonably warm last week, and utilities were out buying,”he said.

Although temperatures have moderated somewhat this week, tradersare already starting to doubt the market’s ability to even comeclose to equaling last year’s 91 Bcf injection figure next week.”The year-on-year deficit is already at its widest (448 Bcf) sinceFebruary, and it will likely get worse next week,” a Chicago tradersaid.

On top of that constructive fundamental outlook, George Leide ofNew York-based Rafferty and Associates piles a heap of technicalanalysis. Citing the recent $3.80-$4.60 trading range, Leidebelieves the market is either building a massive top or a largebase for the next leg up. “We have tested this range five or seventimes. I am surprised we are still in it. Until we break out,you’ve got to be a seller at resistance and a buyer at support,” heexplained. For him, that means selling the July contract at orabout $4.50 on a move higher. “Nobody wants to sell against thetrend, but that’s how you make money.”

However, an intra-day break of the all-time natural gas high of$4.60 that is not followed by a retracement below $4.50 within theproceeding couple of days would turn him extremely bullish. “Thatwould put us in virgin territory. The next level would bepsychological resistance at $5.00,” he said.

On the downside, a break below $4.20 would put the market on thedefensive, possibly clearing the way for a retest of support at$3.80. Coincidentally, July’s 40-day moving average was $3.795yesterday.

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