Sparked by continued strength in the petroleum complex along with the release of a bullish Atlantic hurricane forecast, May natural gas futures on Friday retained — and continued to build on — their gains for the week.

After trading in the $7.70 region for a good portion of the afternoon, the prompt month climbed to test $7.85 before settling at $7.749, up 9.6 cents on the day and 56.5 cents higher than the prior Thursday’s finish to the week. The week also saw April’s expiration on Tuesday at $7.323.

Crude and heating oil futures had big up days once again, likely still feeling the influence of Thursday’s bullish Goldman Sachs research report (see Daily GPI, April 1). May crude posted a record settle Friday of $57.27/bbl, up $1.87. May heating oil finished 4.77 cents higher at $1.6638/gallon.

According to Dr. William M. Gray of Colorado State University, the U.S. Atlantic Basin could be in for a particularly active hurricane season. Of more concern is the fact that the new forecast predicts the season will be worse than initially expected (see related story).

The forecaster said information obtained through March indicates that the 2005 Atlantic hurricane season will be an active one. “We estimate that 2005 will have about 7 hurricanes (average is 5.9), 13 named storms (average is 9.6), 65 named storm days (average is 49), 35 hurricane days (average is 24.5), 3 intense (category 3-4-5) hurricanes (average is 2.3) and 7 intense hurricane days (average is 5.0),” he said.

AccuWeather meteorologist Joe Bastardi is also bullish on the hurricane season and sees the devastating hurricane season of 1954 as an analog for 2005.

Commercial Brokerage Corp.’s Ed Kennedy warned against comparisons though, noting that the storms in 1954 tracked mainly up the East Coast and remained out of the Gulf of Mexico. “Remember that it only takes one storm in the Gulf to really curtail gas production,” he pointed out. “Look at 1992 and Hurricane Andrew.”

Bulls seemed to have almost all of the factors in their corner Friday, and the markets reflected that. On top of the hurricane forecast and petroleum strength, natural gas futures also had leftover support from the Goldman Sachs report. However, spring-like temperatures were displacing the last pockets of cold in some regions of the country.

“The natural gas market is drafting along behind the surge in heating oil, although it is climbing more modestly,” said Tim Evans, an analyst with IFR Energy Services. “Warmer than normal temperatures over the next week or two are likely to sap late heating demand to an extent that will allow an upturn in the 205 Bcf year-on-five-year average surplus.”

Evans said the natural gas market does look like it has potential to draw a flow of fund buying if it can distract fund managers away from the gasoline market. “Summer forecasts for above normal temperatures would be the hook for the position,” he said. “It’s no slam dunk, though, and we view progress as highly contingent on the ongoing strength of the petroleum complex, something we view as on quite shaky fundamental ground.”

He pointed out that May natural gas has reached $7.85, which is “quite near” a perfect 61.8% Fibonacci retracement of the $9.20 to $5.71 drop in the spot price over the October-January time frame.

“The market may have trouble here, leaving it unable to reach its rising channel resistance at $7.92, the $8.00 psychological barrier or the $8.23 spot high from late November as other alternate objectives,” he said. “On the downside, the $7.618 session low and the failed resistance at $7.51-7.52 are the key supports, with a break back below that zone putting the $7.22 uptrend support and the $7.06 floor from Monday’s session back on the list of primary targets.”

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