After a mostly quiet session of straddling the psychological $10 price level, May natural gas futures on Monday lurched higher to close at $10.053, up 15.2 cents from Friday’s close. The renewed push has some market experts seeing even higher prices this time around.

Even though the upside momentum has stalled out a number of times above $10, it appears the bulls are not ready to concede that a price top is in, much less admit defeat.

“While prices have been up here before, we probably have our most legitimate chance to move even higher,” said Tim Evans, an analyst with Citigroup in New York. “While it is not a complete game-changer, I think the Independence Hub being off-line puts that extra incremental stress on the market that could be the basis for a further short-covering leg to what’s already been a significant rally this year. Due to the time of year and the natural slacking of demand during this period, I don’t think it leaves the gas market physically short of supply. What it does have the potential to do is bump up the urgency for buying for storage. I think that becomes a little more of an issue with the outage.”

Evans added that crude’s continued strength is also acting as support for natural gas futures. May crude on Monday put in a $111.85/bbl high on the day before settling at an all-time record crude contract high of $111.76/bbl, up $1.62. “I think the performance of crude has been supportive of natural gas,” he told NGI. “Crude kind of pulls natural gas more into the sphere of influence of the U.S. dollar. I don’t see the U.S. dollar as being a direct influence on the natural gas market at $10, but through crude’s strength — which certainly has ties to the weak U.S. dollar — I think natural gas finds itself more room to the upside.”

Looking at the current price situation, Evans said breaking the $10.294 continuation chart high from back on March 14 is only “one day’s hard march” away. “It doesn’t take that much, and in fact it might not take much more than the thought that there might be buy-stops up there to push the market higher,” Evans added. “In addition to the Independence troubles, U.S. storage has been taken to a year-on-five-year deficit for the first time since June 2004. With the year-on-five-year average [deficit] currently sitting at 23 Bcf, we haven’t had this big of a deficit to the average since April 30, 2004. While this does not spell the end of the world, it does contribute something to the sense that the market is tightening on a longer-term horizon. You have to remember that this is a market that last July had a year-on-five-year average surplus of 410 Bcf, and now we’re at a deficit.”

Short-term traders Friday saw little reason to believe prices were headed lower in spite of a 19.7-cent drop to $9.901. “Every time the market reaches $10.290 to $10.390 selling appears and the market pulls back a little bit, but I think it’s ready to make a run [higher this week],” said a New York floor trader.

Market technicians saw the same 19.7-cent drop on Friday a little differently. “Last week’s price action was a major victory for the bears. The confirmed doji star top [candlestick pattern] on the daily chart into a double top from the early March peak is not good news for the bulls,” said Walter Zimmerman of United Energy. He did add that one more move higher might still be in the cards and the case for a “slightly higher high” was still a possibility.

According to Zimmerman, the bears need a close below $9.510 to bolster their case and he calls “$9.680 ideal support for the bulls as the 0.618 of the $9.290 to $10.314 rally.”

Supply bears may be getting a break. Inventories now stand at 1,234 Bcf, below both last year’s level and the five-year average. If National Weather Service (NWS) estimates of heating demand are correct, however, lower-than-normal heating degree day (HDD) requirements may finally allow meaningful injections to commence. For the week ending April 19, the NWS forecasts 105 HDD for New England, or 30 fewer than normal, and New York, New Jersey and Pennsylvania are expected to experience 100 HDD, or 15 fewer than normal. The industrialized Midwest states of Ohio, Indiana, Michigan, Illinois and Wisconsin are expected to see 111 HDD, or six fewer than a normal tally.

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