Following the $1+ Wednesday-Thursday price advance in July natural gas futures, traders took a little break on Friday to assess the situation. Trading within a 22-cent range of $7.030-$7.250, July natural gas ended up closing out the week at $7.185, down 2.2 cents on the day, but $1.013 higher than the previous Friday’s close.

Trading during the week was mostly shaped by the bullish storage injection and forecasts for some real heat to impact the Northeast in coming days.

“It was mostly quiet Friday following the big day on Thursday. From my understanding, there were quite a number of local traders off the floor on the day,” said Steve Blair, a broker with Rafferty Technical Research in New York. “I think the little pop higher during Friday’s session was probably people covering up some short they may have put on ahead of the weekend. The market tried to pop up again a little bit later, but it didn’t stick either. I think that was just a squaring up of positions. I don’t think there was anything special about it.

“The smaller than expected storage injection on Thursday was all of the impetus the market needed to break out higher,” said Blair. “Like I was saying earlier in the month, the break higher got us back into that $6.50 to $7.50 range that the market has been comfortable in recently.”

The broker said he expected the market to stay “fairly stable” until the next storage report unless prolonged heat blankets the country or another storm comes up. Blair added that temperatures during this time of year mean an awful lot to the market. “The other thing that propelled prices higher this week were the weather forecasts, which are calling for heat in the Midwest and the Midcontinent over the weekend into the week,” he added.

Much of Thursday’s gargantuan 61.7-cent advance was attributed to a lower than expected storage injection figure. The Energy Information Administration (EIA) reported a build of 77 Bcf, but the market was expecting additions closer to 83 Bcf, according to the ICAP derivatives auction. Analysts are probing the rationale for the smaller than anticipated injection.

“Smaller injection numbers than anticipated in EIA storage data shows some signs of a recovery in power generation demand,” said Allen Rather, an independent Texas trader. As far as the meteoric price advance, Rather said that traders took short positions in Wednesday’s sharp 42.7-cent rally, and what followed the release of EIA storage data was a bout of short-covering.

One observer said the rally was primarily locally driven and “this locals-driven stampede is another indication this market is cracked. The pits must go away.” Go away they might. The week was the first of side-by-side trading where traders in the ring could execute orders via hand-held terminals or by open outcry. Initial indications are that acceptance by traders in the ring has been tepid, however.

Seasoned traders suggest that the Wednesday-Thursday advance may have little left. “Unless you can significantly demonstrate why this market is so high, I would take a shot at selling it up at these levels,” said a Houston trader. “It’s going to be a matter of when the natural gas fails. At some point I think you sell this market,” he said.

In the short run, weather bulls may still have the upper hand. “As an upper-level ridge of high pressure continues to shift eastward, the heat that cities across the south-central United States experienced through Thursday will shift over their sister cities of the Northeast this weekend,” said Kristina Baker, AccuWeather meteorologist. She added that summer-like temperatures will be felt across the Northeast as temperatures soar into the 80s and lower 90s this weekend. Temperatures, however, will feel uncomfortably warmer than the thermometer reads as moist air from the western Gulf Coast will cause humidity values to rise.

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