Natural gas bulls kept the heat on futures prices on Friday as the June contract pushed higher ahead of the holiday weekend to close at $11.857, up 16 cents from Thursday’s finish and 76.3 cents higher than the previous week’s close. With an $11.864 high on the day, the prompt-month contract set a new high mark for the up move that began back in August 2007.

The recent hike in prices has fundamental market experts scratching their heads. Looking at storage and price level comparisons with last year, “the numbers are not adding up,” said a New York trader. “Yes, storage was a little fuller, but it does not justify a $4-plus premium. Sure, oil is trading out of its mind, but natural gas supply and demand fundamentals are currently in a different situation.”

For the week ended May 23 prompt-month natural gas futures closed at $11.857 and working gas in storage as of May 16 sat at 1,614 Bcf. For the week that ended May 25, 2007, prompt-month natural gas futures closed at $7.640 and working gas in storage as of May 16, 2007 sat at 1,916 Bcf.

“The petroleum and natural gas markets are all taking some support [Friday] from [Thursday’s] National Hurricane Center forecast calling for 12-16 named storms and six to nine hurricanes in the Atlantic basin this year,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “Hurricane season begins officially on June 1 and runs through Nov. 30. However, we note that while the level of activity predicted is above the long-term average, this call is also very similar to last year’s actual numbers, when there were 15 named storms and six hurricanes. The forecast is also not much different from the April forecast from Colorado State University, which called for 15 named storms and eight hurricanes. We also note that while the arrival of hurricane season can cause a flurry of buying activity, the high-risk period for storms is really between mid-August and mid-October.”

The National Hurricane Center’s forecast released Thursday was a little vague as it said the Atlantic hurricane season could be “near normal” or “above normal” (see related story). For its part, Colorado State University is scheduled to release its updated forecast on June 3.

Whether traders like it or not, crude futures prices continue to have a lot to do with how the natural gas market reacts. On Friday July crude ventured north of $133/bbl for a third consecutive day before settling the regular session at $132.19/bbl, up $1.38 from Thursday’s finish.

“The natural gas market continues to track developments on the petroleum side of the market, even to the extent of focusing on the upcoming hurricane season [Friday], even though natural gas traders are typically more attuned to the weather outlook and would tend to view the updated hurricane forecast as a minor adjustment to prior views, if anything,” Evans said. “Natural gas remains dependent on the rally in crude oil for sustaining its bullish mood, in our estimation, since the recent storage trend is neutral and supply is likely to increase in June once the 1 Bcf/d Independence Hub comes back on-line.”

Looking at the weather picture in the near term, Evans noted that the Frontier Weather six-to 10-day outlook for May 28-June 1 calls for above-normal temperatures for much of the West, except for California where normal conditions are expected. Temperatures in the East are also expected to average near normal for the period. In the 11- to 15-day forecast, covering June 2-6, temperatures are expected to average warmer than normal across most of the continental U.S. portions of the northern Plains. A slice of the Midwest and the Southeast will be the exceptions, with more normal readings.

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