Spurred along by record-breaking crude futures once again, the June natural gas futures contract on Friday carved out a new high for the move before closing at $11.537, up an astounding 27.4 cents from Thursday’s finish and 76 cents higher than the previous week’s close.

“Energy prices look like they just want to keep going higher here. One day the prices will just fall under their own weight, but Friday was not the day,” said a Washington, DC-based broker. “The strength in crude futures is having a substantial impact on natural gas prices. From a Btu comparison level, that trade continues to make new lows for natural gas against crude oil.”

June crude broke above $126/bbl on Friday before settling at a record $125.96. In a rough conversion to Btus, crude futures finished the day at $20.993/MMBtu, or a $9.456 premium to front-month natural gas futures.

“I have had several calls recently talking about conversion,” the broker said. “A call Thursday from a construction company was talking about changing the plumbing and converting everything they can to natural gas from oil. At these prices, this is a very real possibility. These elevated crude prices are playing a huge part in pushing natural gas prices higher. At least natural gas still has chart points to follow here, even if they are in the nosebleed section. A lot of the other energies are literally in uncharted territory.

“Natural gas futures are still in full steam ahead mode toward higher prices. Above the current level, we have possible resistance up at $11.880, which occurred the last week of 2005 when we were coming off of the Hurricane Katrina run-up. We are all still in the bullish camp here because I don’t know what else to do. Anything else is like driving south in the northbound lane of a freeway. It is not a way to stay healthy. The great saying is that when a market is trending, ‘The trend is your friend.’ I think the energies have certainly declared their trend here.”

However, some wonder just how long the strength can last. Citi Futures Perspective analyst Tim Evans noted that upcoming weather might not lend much support to these higher prices. The Frontier Weather six- to 10-day outlook for May 14-18 calls for above-average temperatures in the West, below average from the Texas Panhandle into the Midwest and Northeast. In the 11- to 15-day period covering May 19-23, temperatures are expected to average warmer than normal in the West and normal in the East.

“The natural gas market remains impressed with the strength in crude and heating oil, which traders see as lifting the upside potential for this competing fuel,” Evans said. “However, we note the 11- to 15-day forecast looks less supportive than it did a day ago, and that prices have already more than doubled off last summer’s lows. These values are not cheap, and we see the market vulnerable to a downside test once the Independence Hub returns to service and if crude oil turns down.”

The 1 Bcf/d Independence Hub in the Gulf of Mexico has been off-line since April 8 due to a leak on an associated pipeline (see Daily GPI, April 10). Enterprise Products Partners LP, which owns 80% of the production platform and 100% of the pipeline, said it expects the hub to be back up and running during the first half of May (see Daily GPI, April 29).

©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.