Disregarding the fact that natural gas storage levels were revealed to have reached an all-time record just one day prior, November futures — fresh off Thursday’s 37.5-cent drop — reversed course on Friday by adding 25.2 cents to close at $4.718.

The week of trading saw a little bit of everything. From the October contract’s expiration Monday at $3.730, to the November contract’s failure to fill the related gap, traders weathered a week of ups and downs. However, the lack of a lasting decline following news of record storage levels likely leaves bulls in control, according to one broker.

“Going into Friday trading, $4.400 was considered to be pretty good support,” said Gene McGillian, a broker at Tradition Energy. “We tested it, but then the market got banged all of the way back up above $4.600. This is a pretty good sign that the support level held and I don’t see much changing here in the near term.”

He said that despite some of the fundamentals, natural gas futures values are refusing to go down. “Record storage levels were only able to drag the market down for one day. On Friday there was no fresh news, but we got back two-thirds of Thursday’s loss. I think that some of the underpinnings that have driven natural gas prices higher for close to a month are still there. It is primarily based on the perception that the market is undervalued since it dropped to seven-and-a-half-year lows early last month. With winter heating demand right around the corner and falling production levels tied to the decline in rig counts, the market is showing some resiliency every time it tries to turn south.”

McGillian said he sees the November contract as basically drifting in the near term. “Because we are so early in November’s run as the front month, some of the fundamental pressures that normally work with the physical gas market are still off in the horizon,” he said. “The market can float along on a lot of technical criteria for the time being.”

However, the broker noted that the futures-cash spread is garnering some attention. “The fact is the cash market is more than $2 below the prompt-month contract’s price on Nymex. That is really wide for this time of year. With the futures to cash spread being so large, the question is which will give first. As we get closer to November’s expiration, if there are not any signs of significant heating demand, futures might drop to come closer to cash.” The Henry Hub cash average Friday was around $2.32.

McGillian added that with storage currently sitting at an all-time record 3,589 Bcf, there could be a squeeze on excess gas. “Depending on how the injections go for the rest of this month, we could see a large amount of gas forced upon the spot market due to the lack of room in storage,” he said. “This is definitely a situation to watch as this month unfolds.”

Traders are also taking a close look at the November-December spread, which stands close to 80 cents. “While we feel that the spreads have become a bit stretched, we are also viewing them as a very important bearish portent for flat price, one that further supports our view that the $4 level will be challenged,” said Jim Ritterbusch of Ritterbusch and Associates.

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