Even as cash and futures traders continue to scratch their heads over the recent strength in natural gas prices, the nation’s market points on Thursday were mostly higher with the exception of a few northeastern points and a number of delivery points out West.

Gains and losses on the day were mostly less than a dime, except for out West, which saw points like Southern Border-PG&E drop 29 cents to $8.85 and the Southern California Border Average decline 25 cents to $8.91. While most Northeast points printed gains, Transco Zone 6 NY declined by 2 cents to average $10.44. The Henry Hub gained 5 cents to average $9.74.

Traders were once again awestruck Thursday at the continued price strength in oil and gas futures. Despite an Energy Information Administration report that revealed an inline with expectations 86 Bcf withdrawal from storage for the week ended March 7, April natural gas futures shot higher. The contract hit a high of $10.24 before closing out the day at $10.23, up 21.9 cents from Wednesday. April crude continued its record run on the day by recording a new all-time high of $111/bbl before coming to a close at a record settlement of $110.33/bbl, up 41 cents from Wednesday.

“The recent strength in prices continue to surprise us,” said a Northeast utility trader. “Since our storage situation is OK, we only have a certain amount of gas that we buy each day. We are cutting back a little bit on the day-to-day purchases because we are thinking that prices should soften some. We have not been in the day market as much as we had planned on being during the month of March. We still have to buy some gas because you never know what price is going to do. Even though we are looking at $10 gas, it still could go higher.

“We are dealing with some colder-than-normal weather right now, but it is expected to warm up a bit next week,” he said. “The surprising thing about this current market is that the prices are strong all over, so you can’t really sell one area and buy in another to make money. With prices uniformly high, there really are no bargains out there.”

Going into the storage report, most industry estimates were looking for a withdrawal in the neighborhood of 75 to 90 Bcf. The 86 Bcf withdrawal was smaller than last year’s date-adjusted 104 Bcf draw but larger than the five-year average pull of 80 Bcf.

As of March 7, working gas in storage stood at 1,398 Bcf, according to EIA estimates. Stocks are now 151 Bcf less than last year at this time a year ago and 57 Bcf above the five-year average of 1,341 Bcf. The East region withdrew 54 Bcf while the Producing and West regions removed 23 Bcf and 9 Bcf, respectively.

“The consensus expectation was for an 85 Bcf withdrawal and the number comes out 86, and we’re bullish?” questioned Ed Kennedy of Commercial Brokerage Corp. in Miami. “I don’t understand what is going on here. It is the second week of March, so how much more winter do the bulls think they are going to get? While I certainly did not have fur and claws prior to the report, I am still hard-pressed to explain why we rallied. There is no strong fundamental reason to explain this. Maybe it is because of the crude futures breakout to the upside. The next resistance level for us is up in the low $10.60s.”

Kennedy noted that the recent inexplicable rise in commodity futures prices is likely tied to new money flooding in. “This market doesn’t trade like it used to,” he said. “There are a lot of people that are taking their funds out of the stock and bonds market to buy up hard commodities. My message to them is if they think they are going to be safer over here than they were over there, then they need to have their head examined. Are we loading up on the new highs with new speculators coming into the market? If so, I would not say that is putting the long position in strong hands. It worries me a little bit and is definitely something to be monitored.”

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