After recording a somewhat bearish trading day Tuesday, natural gas futures were back running with the bulls on Wednesday as the June contract recorded a new high for the move at $11.387 before settling at $11.327, up 17.7 cents from Tuesday’s close.

The run-up in natural gas was well supported by continued strength in crude futures, which saw the June contract set another record high and record settle. Prompt-month crude notched a high of $123.75/bbl before settling at $123.53/bbl, up $1.69 from Tuesday’s close.

The $11.387 high Wednesday stretched the previous high of $11.364 — recorded on Tuesday — by 2.3 cents, proving to some what many within the industry had already suspected: that the top is not in yet. Front-month natural gas futures are currently trading at an approximate $3.50 premium to where they were exactly one year ago. Some within the industry say higher crude prices, lower natural gas storage levels, production concerns and less liquefied natural gas imports account for the premium.

As of April 25 natural gas storage had 255 Bcf less than last year at the time and 3 Bcf below the five-year average. On top of those deficits, there are those in the market that are concerned about the industry’s ability to refill storage before winter, especially with LNG cargoes regularly going to higher-priced markets (see Daily GPI, May 7) and the 900 MMcf/d Independence Hub in the Gulf of Mexico still off-line (see Daily GPI, May 5).

Going into Wednesday’s trading session, some market watchers saw natural gas futures at a pivotal crossroads. While it was hard not to deny the pervasive market uptrend, some analysts saw Tuesday’s lackluster finish as a potential bearish omen.

“Tuesday was not a good day for the bulls. Natgas made a slightly higher high, then retreated to a potential doji star [candlestick] top,” Walter Zimmerman of United Energy said in a Wednesday morning note to clients. He added that the 12-month strip failed to make a new high, then fell to a bearish shooting star (candlestick) top. “To confirm a major top natgas needs to break below and close below $10.670 from here as the 0.7862 retracement of the $10.480 to $11.364 rally.” Without a decisive decline and weak close Wednesday, Zimmerman noted that there is no doji star top and the uptrend will likely continue.

Looking at Thursday morning’s natural gas storage report for the week ended May 2, most within the industry expect the Energy Information Administration to reveal an injection in the 60-70 Bcf area. A Reuters survey of 21 industry players created a range of injection estimates from 49 Bcf to 80 Bcf with an average build expectation of 64 Bcf.

Golden, CO-based Bentek Energy said its flow model indicates an injection of 70 Bcf, which would bring stocks 26.6% below the five-year high and 0.5% below the five-year average. The Bentek estimate assumes a 48 Bcf injection in the East region, while the Producing and West regions contribute 12 Bcf and 10 Bcf, respectively.

The number revealed in the 10:30 a.m. EDT Thursday morning report will have some hefty historical competition. The injection will be compared to last year’s 94 Bcf build for the week and the five-year average injection of 73 Bcf.

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