Fueled by a supportive natural gas storage withdrawal, May natural gas futures on Thursday surged higher to within four-tenths of a cent of the move’s $10.294 high before collapsing in afternoon trade. The prompt-month contract ended up closing the day at $10.098, up 4.2 cents from Wednesday’s close.

After springing higher in overnight electronic Globex trading on the expectations of a supportive natural gas storage withdrawal, May natural gas futures traders were not disappointed as the Energy Information Administration (EIA) reported Thursday morning that 14 Bcf was removed from underground storage for the week ended April 4.

While the draw was in the realm of most expectations, it moved the meager year-on-five-year average surplus to a year-on-five-year average deficit. May natural gas futures opened Thursday’s regular session at $10.190 and was trading at $10.200 just prior to the 10:30 a.m. EDT report. In the minutes that immediately followed the storage number, the prompt-month contract sprang higher to trade at $10.290 before backing off.

Commercial Brokerage Corp.’s Ed Kennedy said he sees the Independence Hub outage as much more interesting than the storage report (see Daily GPI, April 10a). “The estimates I am hearing on repair are three to five days. It is 1 Bcf/d, so I don’t want to underplay that,” he said. “The real problem is you can’t go around the hub. It is not like a pipeline explosion where you can just go around it, so there is impact on the market there. The colder-than-normal temp forecast for the Great Lakes, New York and New England are also having an impact. These are unseasonable temperatures, so there is something there. Let’s see if we can get above the old high for the move of $10.294 and settle, then there’ll be a lot to talk about.”

Adding to the bullish ramifications was the fact that the draw was a little large compared to some expectations. While a Reuters survey of 21 industry players produced a range of withdrawal expectations from 3 Bcf to 25 Bcf with an average draw expectation of 13 Bcf, Bentek Energy’s flow model indicated only a withdrawal of 8 Bcf. In addition to coming in well under the 15 Bcf five-year average injection for the week, the withdrawal was also bullish compared to last year’s 33 Bcf injection.

The failure to start injections would not normally be a problem if it weren’t for the fact that supplies are lower than last year. As of April 4, supplies stand at 1,234 Bcf, 351 Bcf less than last year at this time and 23 Bcf below the five-year average of 1,257 Bcf.

Wednesday’s government report on crude oil supplies shows what an impact a bullish report can have on energy markets. Traders were expecting a modest build in crude supplies of 1 to 2 million barrels, but the release of the data showed a 3.1 million barrel decline. May crude oil futures on Wednesday vaulted $2.37/bbl to settle at $110.87/bbl after trading at a record $112.20/bbl. The prompt-month crude contract backed off on Thursday, dropping 76 cents to $110.11/bbl.

In Wednesday’s natural gas trading it was a bullish feeding frenzy as major developments all conspired to lift prices. “There was a shut-in at the Independence Hub and that is what’s boosting prices,” said a New York floor trader. He added that the Colorado State University 2008 hurricane forecast was also bullish as well as the soaring petroleum complex (see Daily GPI, April 10b). “There wasn’t a bearish piece of news out of the market [Wednesday]. I’m surprised it didn’t finish at $10.500, that is how hot this market was running.”

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