In another stunning display of bullish behavior, natural gas futures climbed higher for the third-straight session Friday as traders distanced themselves from bearish supply data released Thursday and focused on an updated forecast for the upcoming hurricane season.

July futures finished at $6.251, up 18.5 cents for the session and within striking distance of its $6.27 high for the week. At only 50,231 Friday, estimated volume was weak and cast a shadow of doubt on the day’s sizable advance.

While still calling for the same number of hurricanes (eight) as he did in his April 4 report (see Daily GPI April 7), hurricane forecaster Dr. William Gray of Colorado State University on Friday upped both his prediction for the number of named storms from 12 to 14 and the number of storm days from 65 to 70. If realized, a hurricane season of that magnitude would compare bullishly versus both the historical norm and last year.

A normal hurricane season, Gray calculates, consists of 5.9 hurricanes, 9.6 named storms and 49.1 storm days. Last year there were 12 named storms, but only four hurricanes, and only two of those ever made it past category three intensity (winds of 111-130 mph). Nevertheless, 2002 was an active year in the Gulf of Mexico with six named storms and significant disruption to natural gas and petroleum producing infrastructure and operations, mainly because of Tropical Storm Hanna and Hurricanes Isidore and Lili, the last of which made it to category four intensity (winds of 131-155 mph) while it was moving through offshore Louisiana production facilities.

And while the hurricane forecast is modestly supportive of prices, the temperature outlook is not. According to the latest six- to 10-day forecast released Friday by the National Weather Service, below normal temperatures are expected to continue across a large portion of the eastern and central United States through at least June 9. Specifically, the NWS predicts cool weather from New York state across the Great Lakes and Northern Plains to Wyoming. To the south, below normal temperatures are expected to extend down to a line from Texas to Georgia.

The weather forecasts were not the only fundamental factor open to interpretation last week. Also sending mixed signals was the storage situation. While the absolute level of gas in the ground (1,085 Bcf as of May 23) is still more than 500 Bcf less that the five-year average for this time of year, storage players have been working diligently at reducing that shortfall. Proof of that is evident in two areas, the hefty storage injections over the past month and the surging cash market prices.

“Our strategy this year is to stay disciplined with our storage injections,” a Northeast utility buyer said Thursday. “We don’t let price dissuade us from putting gas into the ground. In prior years we had some discretion with when to fill storage. This year we are putting gas into the ground each day.”

“That’s a textbook case of price inelasticity,” explains Tom Saal of Miami-based Commercial Brokerage Corp., commenting on the relative price-indifferent buying attitude that storage players are taking this refill season. “Just like back in 2001, we could see some triple-digit weekly storage injections from now through July.”

Looking ahead, Saal is interested to see what cash prices do this week. “It is premature to judge the cash market on the last two days of the month,” he continued, noting that it will be interesting to see if the market is able to hold on to the substantial forward premium exhibited the last month. “If we continue to see prompt futures trading at a dime premium to spot cash, it will entice more storage buying.” The flip side to that bullish scenario, market watchers contend, is that at some point the large storage refills will cause longs to reconsider their positions.

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