After trading within an extremely tight, 3.5-cent range for mostof yesterday’s session, natural gas futures were lifted by a waveof buying that hit the market literally seconds after the AmericanGas Association released one of its most bullish storage reports sofar this injection season.

August received the biggest boost, trading as much as 19 centsabove Tuesday’s close. However, those gains were trimmedconsiderably into the closing bell yesterday, leaving the promptcontract with a 10.3-cent gain at $3.763. Comparatively, theNovember-March winter strip advanced 12.2 cents to close at $3.861.

According to the AGA, 54 Bcf was injected into undergroundstorage facilities last week, bringing the total working gas to1,857 Bcf. While that refill was more than the 41 Bcf seen thistime last year, it fell significantly short of the 60-80 Bcfexpected and of last week’s 70 Bcf build. Storage levels now stand423 Bcf below year-ago levels and 181 Bcf less than the 5-yearaverage.

Although the relatively small injection fell below most of theirexpectations, traders were shocked by the market’s abrupt upwardreaction. “Sure it was lower than expected, but we still managed tonarrow the deficit to last year,” a cash trader commented.

The New York-based Pegasus Econometric Group weighed in on theimpact of the weekly supply report. “Since the AGA moved therelease of its natural gas storage data up to 2:00 (EDT) back inMarch, the futures market has tended to go into hibernationWednesday morning only to convulse into vigorous life withinseconds of the data hitting the wires and not always in apredictable fashion,” the group wrote in it daily report yesterdaymorning.

Tom Saal of Pioneer Futures agreed, adding that traders’ use ofmarket orders instead of limit orders on Wednesday afternoon isinjecting volatility into the market. “The market was stuck between$3.67 and $3.68 for more than an hour leading up to the storagereport [yesterday]. During that period, anyone with resting orlimit orders 15 cents on either side of the market cancelled themfearing that they would be taken out after the storage number wasreleased. This creates a virtual vacuum both above and below themarket,” he said.

“It is this vacuum that allows the market to move almost withoutany resistance for 10 or 20 cents just minutes after the storagereport is released. Yesterday for example, the August contractmoved from $3.69 at 2:00 p.m. to $3.85 just two minutes later.”

In a normal market, Saal continues, “there will be sell ordersabove the current level and buy orders below that will createfriction and make it difficult for prices to move so dramatically.”

Looking ahead to expiration-day, Saal expects the Augustcontract to grind higher into final settlement. “We held support inthe upper $3.50s, and completed an outside-up day on the dailycharts. The only thing the market failed to do yesterday was settlenear its highs. I look for traders to retest [Wednesday’s] $3.85high again [Thursday],” he said.

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