Heading towards expiration at the end of trading Thursday, March natural gas futures continued to blaze a trail higher for the second consecutive session. The prompt month soared 20.8 cents to settle at $6.311, while April natural gas closed at $6.42, up 19.9 cents.

Unlike trading on Tuesday, natural gas futures only received partial petroleum support on Wednesday, with crude and heating oil futures parting ways. April crude settled down 25 cents at $51.17/bbl, while March heating oil closed up 4.29 cents at $1.4831/gallon.

“Sooner or later, we were bound to get some short-covering by the funds and probably people who were short the March contract and needed to buy back at expiration,” said Tom Saal of Commercial Brokerage Corp. in Miami. “That is pretty much what we have been seeing. Natural gas is up basically because it is that time of the month and the funds are very short.”

Saal noted that some of the moving averages along with other signals might have triggered the funds to buy back some of their shorts and maybe start to go long. “I think [the funds] were seesawing back and forth for a while as the market was kind of going sideways a bit,” he said. “Some reports from the floor were that it was very difficult to trade during that time because they were getting little false breakout signals in both directions. That is a really tough environment to trade in.”

Saal said he believes March can even go a little bit higher before expiration Thursday, unless the storage number is a “real outlier” when the Energy Information Administration releases its report Thursday morning. I am looking for an 82 Bcf withdrawal for the week ended Feb. 18,” Saal said. “I know I am on the low-end, but I think the market is telling us now — based on the spreads — to leave the gas in the ground.”

From Saal’s estimate, the cost of gas in the ground is at $5.95. “I say leave the gas in the ground…why should they pull it out?” he asked. “You could pull it out and make 30 cents, but the supply you’re going to replace it with is going to cost you more than the gas you already have.”

Commenting on the size of the current storage surplus, Saal said that the market has not seen such a scenario in several years. “It’s remarkable that we have a forward carry built into this market already,” he said. “Usually, we don’t see anything this dramatic until May or June.”

Advest Inc.’s Jay Levine said that while the industry appears to be looking for a natural gas storage withdrawal Thursday somewhere in the 90-100 Bcf area, he believes it will reveal a 103 Bcf pull. Noting that trading on Thursday could be interesting, Levine pointed out that in addition to the natural gas storage report and the March futures expiration, the API/DOE petroleum stats will also be released — due to the President’s Day holiday this past Monday.

Citigroup’s Kyle Cooper is looking for a draw between 89 and 99 Bcf. “Unfortunately, our estimation carries a very high degree of uncertainty,” Cooper said. “A report in this range would again be considered bullish from a temperature-adjusted standpoint.”

The EIA report will go up against last year’s 166 Bcf pull and the 131 Bcf five-year average withdrawal for the period.

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