In spite of bearish EIA storage figures, natural gas futures turned tail and headed higher in active inventory report-driven trading Thursday on the New York Mercantile Exchange. The EIA reported withdrawals from working gas inventory tallied a miserly 23 Bcf, below the ICAP options auction consensus of 25.5 Bcf, and short of a Reuter’s survey of 22 analysts and traders that predicted a fall of 31 Bcf. Bentek Energy of Colorado calculated a withdrawal of 40.9 Bcf in its Wednesday Daily Market Summary.
The April natural gas futures jumped $0.375 to $7.328 and the May contract added $0.364 to $7.467.
The thin withdrawal leaves working gas inventories at 1,809 Bcf, well ahead of the 1,303 Bcf of a year ago and leagues ahead of the five-year average of 1,085 Bcf, EIA figures show.
“There was significant fund buying all around the ring throughout the day,” said a New York floor trader. It wasn’t a case of panic buying, but “there was some urgency.” He said “if the EIA number came out between a 20 and 30 Bcf withdrawal,” they expected prices to rise to $7.32.
In spite of the healthy run higher, there may be more left to the price advance. “I think there is more to the upside. If the market can trade above $7.50, I think it can move higher still. The floor trader said he thought that buy stop orders, which are capable of lifting the market, were placed “another 25 cents higher.”
A Denver trader said he didn’t think funds and managed accounts were ready to exit the market en masse just yet, but “you know how those guys are. Once they start getting out of their positions they all run for the door at the same time.”
“I don’t think we are quite at that point yet. As time goes by they will lower their stops to $7.70, $7.60, $7.50 etc. so if we trade in a sideways market, there will come a point at which those (buy) stops will get triggered.”
The Commodity Futures Trading Commission reported Friday, March 17, that as of March 14, noncommercials, principally funds and managed accounts, held a whopping 41,773 net short (futures only) contracts. Traders believe such a large outstanding short position represents a formidable reservoir of buying power capable of sending futures prices higher.
Market bulls had been expecting Thursday’s inventory figures to spark a rally. “Today’s (Thursday) focus now shifts to natural gas. Look for a draw of about 40 Bcf,” said Phil Flynn of Alaron. In a note to clients before the market opened he suggested “the market has been rallying in its traditional March fashion” yet has bumped up against major resistance.”
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