Natural gas futures extended to new two-week highs Thursday on the surprising news that 9 Bcf was withdrawn from underground storage facilities last week. Bulls were quick to react to the data, and were responsible for propelling the market 17 cents higher in the five minutes following the 10:30 a.m. EDT release. The market continued to chop higher in the late morning and afternoon in an extremely active session that saw more than 90,000 contracts change hands. May finished at $5.419, up 22.4 cents for the day.

According to the Energy Information Administration, there was 671 Bcf of working gas in storage on April 4, which was 9 Bcf less than the previous week. Although last week’s withdrawal matched the withdrawal during the same week last year, it came in sharp contrast to the 10-20 Bcf range of expectations. Last week, the market received bearish news when the EIA said that 37 Bcf was injected for the week ending March 28.

Last week’s stunning storage injection has traders buzzing about what might be revealed in next Thursday’s storage report. According to the National Weather Service, degree days heating for this week were even greater that last week (106 versus 100 DDH). “The cooler weather this week suggests a further round of supportive storage data next time around,” writes Tim Evans of New York-based IFR Pegasus in a note to customers Thursday.

However, looking ahead, Evans is skeptical of the market’s ability to tack on additional gains, at least in the short-run. “While [storage] is certainly a constructive development, we note that a warming trend in temperatures into next week offers a competing influence that may undercut cash prices and hence the futures.” Now that May natural gas has risen to resistance in the $5.45-50 area, Evans sees the possibility the market will consolidate or even pull back a little before mounting an assault on the $5.55 high from March 20.

Meanwhile, Craig Coberly of Atlanta-based GSC Energy feels that while a retracement down to the $5.18 level is possible ahead of the weekend, it is unlikely the market will extend much lower. “We have rebounded off the lows from last week. It is my guess that we will see 40 days of higher prices.” Specifically, Coberly looks for 38% and 50% Fibonacci retracements off the February to April move, which would put prices at the $6.33 and $6.77 levels respectively.

Ed Kennedy of Commercial Brokerage Corp. in Miami is a little more reticent to make such a bold intermediate-term prediction. However, in the near term he does not rule out an extension to the $5.50 area. “There is more than 7,000 open interest in the $5.50 call and nearly 3,500 open interest in the $5.50 put. The market will likely gravitate toward those levels. Resistance is seen at $5.51 and $5.55.”

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