Adding to Tuesday’s modest price advance, natural gas futures surged higher Wednesday as early morning commercial buying triggered local short-covering at midday. Buying was almost uniform across the 12-month strip, suggesting hedging activity by end-users who may have missed their opportunity the last time prices were near $5.25. June futures closed at $5.385, up 14.9 cents for the session. The 12-month strip, meanwhile, outperformed the prompt month, advancing 15.1 cents to $5.446.

In addition to strip buying and local short-covering, traders were quick to point to strength in the nearby cash market. Swing deals for May 1 delivery notched double-digit gains over baseload price levels as the physical market got caught in a bit of short-squeeze of its own, traders agreed. Also boosting cash prices, was strength in electricity markets, which prompted gas buyers to take advantage of favorable spark spreads values. NGI’s Henry Hub daily price averaged $5.25, more than a dime above the May futures settle of $5.123.

However, as with most shoulder month periods when fundamental factors are in flux, traders were quick Wednesday to come back to technical factors for their best price clues. “The rebound in price has been sufficient to set Tuesday’s $5.145 low in place as support, reinforcing its candidacy as a possible longer-term bottom,” wrote Tim Evans of IFR Pegasus in a note to customers Wednesday.

Similarly, Craig Coberly of GSC in Atlanta agreed that a bottom is in place, pointing to the ability of the June contract to settle over the downward sloping Gann support line Wednesday at $5.35. Coberly sees resistance at $5.46 and $5.81. Evans, meanwhile is long from $5.33 with a protective sell stop at $5.13 to minimize the loss should the market turn. Assuming the market continues higher, Evans looks to add more length with a $5.58 buy stop.

Technical factors will be put on the back burner at least for a while Thursday morning as the market digests the latest storage data from the Energy Information Administration. The common range of expectations is centered on a build of roughly 45 Bcf, which would almost match the five-year average refill of 47 Bcf while falling between last year’s 31 Bcf injection and last week’s 61 Bcf addition. While Thursday’s release may be open to traders’ interpretation, the big storage picture is still bullish. At 684 Bcf, storage is 891 Bcf less than year-ago levels and 573 Bcf less than the five-year average.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.