Putting in their eighth up day out of the last nine sessions, September natural gas futures on Friday saved their best for the last 15 minutes of the regular session. During this time, the prompt month rallied to record a new $8.750 high before settling at $8.700, up 22.9 cents on the day.

After taking a day off midweek, Thursday and Friday’s higher settles allowed September natural gas to close 81.5 cents higher than the previous week’s $7.885 close.

“All of the energy markets were really pretty quiet Friday,” said Steve Blair of Rafferty Technical Research in New York. “This seems to be a trend over the last couple of Fridays and I guess it is pretty normal during the summer vacation season.

“I think a lot of the late movement in the market Friday was probably short-covering ahead of the weekend. I think there were a lot of people squaring up their positions. The market really sort of rallied in the last 15-20 minutes of the session. Overall, I think this natural gas futures market, between all of this heat we are having across the country in combination with storm fears, is going to have a hard time coming down any time soon.”

Blair said the market currently has a number of factors supporting it, including the recent National Oceanic and Atmospheric Administration (NOAA) update, which called for more storm activity in the Atlantic than previously expected (see Daily GPI, Aug. 3). With the 2005 Atlantic hurricane season less than halfway over, NOAA on Tuesday raised its activity prediction, warning that up to 14 more tropical storms and five more major hurricanes could still be out there.

As for the potential for the prompt month to crest $9, Blair said it is a definite possibility. “I can’t see any reason why the market would not get there,” he said. “Let’s put it this way: any new supportive news will propel this thing to $9 in a heartbeat, whether it be a storm in the Gulf or a continuation of the heat wave. I think futures would currently have a much harder time selling off than it would moving up.”

While calling the Energy Information Administration’s revision of its storage reporting methodology a “nonevent,” Blair said the real story is the overall working gas level when compared to last year.

“The storage situation is becoming more supportive as the level gets closer and closer to year ago levels. Even though year-ago levels were ample, I think the idea that we were several hundred Bcf above year-ago stocks at the beginning of the injection season and now we are catching up pretty quickly marks yet another bullish indicator.”

Thursday’s release of lower than expected inventory data was a pleasant surprise to the bulls. The injection of 37 Bcf was well below estimates ranging from 40 to 50 Bcf and shy of the consensus forecast of 43 Bcf reached in Wednesday’s ICAP auction.

Economists cite current price gains in natural gas futures as falling on “the vertical portion of the supply curve…What’s interesting about the current advance is that it is occurring at a time when storage typically grows. That is happening, but it is at a pretty slow pace,” said Bill O’Grady, vice president at AG Edwards in St. Louis.

He noted there are facilities that will inject gas at a steady pace, but in the producing regions there have been draws, because the gas is stored in salt domes and they are unable to meet storage and market requirements under current conditions.

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