After plunging in Tuesday’s regular session and then again in overnight Access trade to a $6.425 bottom, November natural gas futures on Wednesday reversed course eventually settling up 21.5 cents at $6.851. The up-move corresponded with a similar rebound in crude oil futures, which fell $1.13 on Tuesday and then rallied Wednesday to gain exactly $1.13 back, settling at $53.64.

“I did not hear any fundamental reasons out there that made any sense or anything else to explain this type of rally in natural gas,” a Washington, DC-based broker said. “We thought we might see the $6.34 number in the sell-off as a 50% correction off the move. What is interesting is we came down to $6.425 in Access, which comes close to the high on Sept. 22 of $6.415, the level marked out as the first wave in the Elliot Five-Wave pattern.”

Noting that it is often difficult with the Elliot Wave to decipher which leg of the move the market is currently in, the broker said he wasn’t sure whether the $6.425 counts as a completed fourth wave down. “I think that’s still has to be answered,” he said. “If that was a four wave correction, you could now be looking for the fifth wave to exceed the $7.44 level by some amount.”

He added that the current hot topic within the business is the premium at which futures are trading when compared to the cash market. “Obviously, at some point in time there will be a convergence of the two,” the broker noted. “If I can buy November gas in the Chicago market for $1.40 under the screen right now, store it for a month…and then sell it, that is enough of a margin for somebody to want to do it.”

Echoing what a number of other traders have said recently, the broker noted that he wasn’t sure which market would be more likely to move toward the other, or at what ratio. “The sell-off Tuesday appeared to be some attempt to bring the markets more inline, but Wednesday’s action goes to show that the days of 20-cent ranges being big news are behind us.”

Touching on the Energy Information Administration’s storage report to be released Thursday morning, the broker said the question surrounding storage has changed from what it was at the beginning of the season. “I think the only question in terms of natural gas storage is whether we will set an all-time record heading into winter in terms of how much we have underground. I don’t think the absolute number is really that much of an issue anymore.”

For the report for the week ended Oct. 8, IFR Energy Services’ Tim Evans is calling for a 65-75 Bcf net injection. “Storage is still approaching its effective capacity and it will be a challenge to find a home for all of the current supply, even with 1.7 Bcf/d still shuttered in the Gulf of Mexico,” he said.

Citigroup’s Kyle Cooper is looking for a build between 66 and 76 Bcf. “Inventories of 3,092 Bcf now stand 188 Bcf (6.5%) above 2003 levels,” he said.

Overall, industry projections are for a build between 50 Bcf and 76 Bcf. The injection will go up against the five-year average build of 56 Bcf and last year’s 77 Bcf injection for the week.

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