Attempting to capture Tuesday’s downward momentum, natural gas futures traders on Wednesday pushed the June contract to a low of $10.665 before an afternoon bounce finished the regular session at virtually unchanged from Tuesday’s close. The prompt-month contract closed at $10.843, up one-tenth of a penny from the previous day.

The afternoon rally Wednesday lended some doubt to the idea that Monday’s $11.360 high basis the May contract was the peak of the larger move higher that began last August following a $5.230 front-month contract low on Aug. 27, 2007.

“This week’s trading so far has had something for everyone,” said a Washington, DC-based broker. “We surged higher Monday, had a big down day Tuesday, which made me think that the five-wave top was in. On Wednesday we were validating that belief as the market probed lower, but then we had a significant rally at the end. The rally Wednesday was pretty impressive because the market was coming off of the sell-off Tuesday and it was also in the face of weakness in big brother crude futures. So maybe this is one more little correction before a final spasm higher.”

The industry has also been talking about the pending REX-West pipeline start-up and how it might affect futures (see Daily GPI, April 30). “There might be some reduction from storage inventories with regard to filling that pipeline,” the broker said. “Traders on Wednesday were talking about how REX-West was having a bullish influence on things.”

After the final price push higher in the move, the broker said he expects there to be a fairly sizeable and extended pullback that follows. “When this wave up does in fact end, we are going to have more than a slight move down within the much larger uptrend. I think it will be a noticeable sell-off in the neighborhood of more than a dollar. Now is it the end of the natural gas bull market? No, I don’t think so, but I do believe it will be more of a correction than a three- to four-day affair type of thing.”

Turning attention to Thursday morning’s natural gas storage report for the week ended April 25, the broker said he expects the Energy Information Administration (EIA) to report a 50-60 Bcf injection. A Reuters survey of 21 industry players produced a range of injections from 66 Bcf to 93 Bcf with an average build prediction of 75 Bcf. Bentek Energy’s flow model indicates an injection of 79 Bcf, bringing stocks 27.8% below the five-year high and 0.8% below the five-year average. The research and analysis firm said it expects a 58 Bcf injection in the East region, a 16 Bcf injection in the Producing region and a 5 Bcf injection in the West region.

The number revealed Thursday morning will also be compared to last year’s 67 Bcf build for the week and the five-year average injection of 64 Bcf.

Addressing concerns that industry won’t be able to refill storage by winter, the broker said promising production increases from shale plays are offsetting much of the decline of some of the older production basins, but liquefied natural gas (LNG) likely won’t be able to pick up much of the slack. “Until our price starts equalizing with crude, you are going to see the crude-priced LNG cargoes being called away from us,” he said. “We wanted to diversify and have a global LNG industry. Well, we are getting there and now we are going to reap the headaches from it in some regards, especially for those who want cheap gas. Obviously, one person’s headache is another person’s dream.”

On the weather front, temperatures across the country are expected to be varied over the next few days, lending neither bulls or bears a hand. According to AccuWeather.com meteorologist Brett Anderson, “major warming” will take place Thursday afternoon from the Ohio Valley to the Southeast as the counter-clockwise flow around a developing storm draws air northeastward. “The combination of desert air from the Southwest plus air from the Gulf will cause afternoon temperatures to be 10-15 degrees greater than what they were on Wednesday across this region,” he said.

In the High Plains a developing storm will produce a swath of moderate to heavy snow from the central Rockies to the western Dakotas through Friday, he said. “Most of the snow will be confined from Montana to the Colorado Rockies through Thursday. Rain will change to heavy snow from eastern Wyoming to the Black Hills of South Dakota late Thursday night and continue through Friday.”

Taking a look at the Northeast, Anderson said the region will remain rather cool on Thursday, but as warmer air from the Southwest tries to move in, it will be forced up and over the cooler dome of air. “As this air lifts it will cool and condense in clouds and eventually some rain from the Great Lakes to the northern Mid-Atlantic.”

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