Mired in a sea of bearish news, natural gas futures traders glommed on to the only available bullish factor Wednesday and rode a buying wave created by an early spike in the nearby crude oil market. The October natural gas contract notched a new $4.66 high for the week by 11 a.m. EDT. Modest position squaring was seen in the afternoon, which allowed prices to ease back to finish the session at $4.588, a 7.7-cent advance on the day.

The Organization of Petroleum Exporting Countries (OPEC) announced a 0.9 million barrel a day cut in production quotas starting Nov. 1, sending shock waves through the crude oil markets Wednesday. The November crude contract received the biggest buying boost, jumping 4% to $28.24 on the day. And while analysts agree that the longer-term price outlook for oil is more tied to Iraq’s efforts to ramp its production back up, Wednesday’s news was enough to stir up the natural gas bulls.

However, the buying euphoria was tempered somewhat by expectations calling for a large injection in Thursday’s release of fresh storage data. Consensus estimates span the 90-105 Bcf range, which if realized would easily exceed the 73 Bcf five-year average as well as the 66 Bcf refill from last year. Last Thursday, the market dropped to new 2003 lows on the news that a whopping 102 Bcf had been injected into storage during the week prior.

While the storage data presents a weekly recurring reminder that supply is exceeding demand relative to previous years, natural gas has the look of a market ready to move higher, according to broker Jay Levine of New Hampshire-based Advest Inc. “Regardless of storage the greater risk is [remains] up rather than down,” said Levine. Specifically, he looks to buy dips for a daily move to the upside of 8-10 cents.

Tim Evans of IFR Pegasus in New York agrees that the longer-term trend is up, but does not rule out a continuation to the downside. “While there may be some psychological support for the [October] contract at $4.50, we think it may be inclined to fall toward the $4.39 low for [October] or the $4.36 spot uptrend off the 2002 lows from November 2002 as its intermediate-term target,” he said.

However, when the market does manage to turn itself around, Evans is ready with a $4.92 buy stop in November futures waiting to establish a 50% long position. At least initially, a $4.67 sell-stop would serve as protection should the market resume the downtrend.

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