Natural gas futures continued to explore the upside Wednesday as crude again posted new all-time highs. After trading as low as $7.870 and as high as $8.280, May natural gas ended up finishing the regular session at $8.192, up 18.4 cents on the day, bringing the three-day total gain to $1.057.

Supporting factors for natural gas remained early heat in Texas and continued strength in crude futures as tensions over Nigeria and Iran showed no signs of abating Wednesday. In a week of all-time highs for crude, the May contract set yet another one Wednesday with a high of $72.40/bbl before settling at $72.17/bbl, up 82 cents on the day.

“We don’t have a whole lot of fundamental reason for natural gas to have broken out to the upside, but that is exactly what it has done here,” said Tim Evans, an analyst with IFR Energy Services in New York. “I think there is a lot to the idea that we are following crude blindly higher. I also think it is part of a broader desire on the part of investors to own mineral resources of all kinds, We’ve got gold up at $636, silver past $14, copper at $3 and crude oil at $72. It is all lumped together in a larger psychological phenomenon that does not necessarily care to note the fundamental details of why this should not be happening.”

Attributing the heat in Texas this week as a “yee-haw reason for buying” natural gas, Evans pointed out that even if “the warmer weather resulted in one relatively bullish storage injection number in next week’s Energy Information Administration report, what does the industry do for comparable demand the week after? I don’t have an answer for that. Sure, this is a nice rally and a significant technical event, but ultimately I think this will still prove to be an upward correction within a larger bear market.”

However, Evans told NGI that the recent record open interest does represent the potential for the market to run a long way because “everyone who sold natgas during March is now out of the money.”

As for the rest of the week, Evans said the market’s direction will depend on a number of factors, including May crude’s expiration on Thursday. “That could see a few fireworks one way or the other,” he said. “We also have the natural gas storage report Thursday, which I don’t think will be much of an event this time around. I am looking for an 80 Bcf injection for the week ended April 14, which could provide for a little bit of a short-term bearish response if the market got it wrong again. On Friday, I would expect some short-term profit-taking, which might dampen this rally.”

Students of historical market performance query how far futures may advance. The spot futures posted what might be a seasonal low of $6.450 on March 8, and those who closely follow market seasonality suggest that the market is staging a preseason rally.

“What is the bullish case here? The upside target for a 15-year average preseason rally with $6.450 as the seasonal low would be the $9.930 area as $6.450 plus a 54% gain in value,” noted Walter Zimmerman of United Energy.

Others are looking for crude oil to continue leading the way. “Tuesday the natural gas failed initially against the $7.85 to $7.88 area, but crude rallied and natural gas followed,” said a New York floor trader Wednesday morning. “There has been a lot of short-covering in the last couple of days, but it’s unclear how much is left. From a fundamental standpoint there was nothing that suggested prices should rise like they have. Overall it’s still open window weather.”

MDA EarthSat Energy Weather said Wednesday the somewhat warmer April could make way for a milder May. The company’s May forecast continues to favor mainly seasonal conditions for the eastern half of the U.S. and normal to above normal across the West.

According to Matt Rogers, deputy director and meteorologist, “The same analog years that successfully forecast the warm April in the Midcontinent and East are suggesting that May will be less impressive in these same areas.” Currently here in April, temperatures have been averaging 9 to 12 degrees Fahrenheit above normal for the Plains and 3 to 5 degrees above normal for the East Coast, he noted. However, little rain has fallen over the East Coast during the last month, which means the area should be monitored closely as far as developing drought. Rogers added that low soil moisture conditions tend to enhance high temperatures at times.

Looking ahead to June, Rogers said, “June would offer the best chance for summer heat in parts of the East, especially in the southern Mid-Atlantic (PJM)”. MDA EarthSat Weather said it is expecting more 90-degree days in Washington, DC this June vs. June 2005.

Turning attention to the natural gas storage situation, which still sits with a significant surplus over historical comparisons, the change in storage revealed Thursday morning for the week ended April 14 will be compared to last year’s 49 Bcf injection and the five-year average injection of 33 Bcf.

A Reuters survey of 25 industry players revealed an average injection estimate of 52 Bcf, while the ICAP derivatives auction Wednesday afternoon revealed a consensus injection of 42.58 Bcf.

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