Natural gas bulls had their way Wednesday as there was no lack of price-supporting news running around the market. The May natural gas futures contract notched a $10.100 high on the day before closing at $10.056, up 35.9 cents from Tuesday’s close.

Some traders were surprised that the gains were not even larger as the market was bombarded with news of the Independence Hub shutdown in the Gulf of Mexico, Colorado State University’s (CSU) active hurricane forecast, bullish petroleum reports and the continued battering of the U.S. dollar’s value.

“The bullish CSU hurricane forecast and the suspended operations at the Independence Hub due to a leak on an associated pipeline were certainly the drivers of Wednesday’s run-up, but the weak dollar also saw almost all commodities head higher on the day,” said a Washington, DC-based broker.

On Wednesday Enterprise Product Partners LP said the Independence Hub natural gas platform and the associated Independence Trail pipeline were closed after a leak was discovered, which the company found later in the day to be originating from a stainless steel O-ring gasket located on the flex joint of the pipeline in approximately 85 feet of water. The hub had been averaging production of around 900 MMcf/d prior to the suspension (see related story). The day also saw CSU’s William Gray announce a well-above-average Atlantic hurricane season this year with nearly even odds that a major hurricane will make landfall on the Gulf Coast (see related story).

The broker noted that the rest of the commodities were also up on the day. “Crude had another record settle at $110.87/bbl, distillate was up, as was coffee, all of the metals, etc.,” he said “The dollar was getting hammered Wednesday, so the saying ‘weak dollar, strong commodities’ definitely could have been in play.”

Turning attention back to natural gas, the broker said he was having some problem with the idea that the current elevated prices could be sustained. “The question now is whether we can punch back up above $10.200,” he noted. “If we can, then we have broken out of the recent pattern and can look to the upside. As of right now, we are not quite there on the momentum readings on the chart. While we are certainly threatening to break out to the upside, we hit $10.100 and got kind of stuck with no second wave to get us over the hump. Prices are certainly strong, but we are supposed to be in the 60- to 70-degree range in the Mid-Atlantic for at least part of the six- to 10-day forecast, so $10 gas might have some trouble sticking around.”

As for the reports that the Independence Hub could be off-line for one to four weeks for repairs, the broker said he would bet on the shorter outage duration. “The one thing I will always bet on is with prices this high, those repairs will get fixed sooner rather than later. While they are saying one to four weeks, I wouldn’t be surprised if things are wrapped up in six days because at these prices they can fly as many helicopters to the site as they want. Now the offshore is the offshore, but Enterprise will get the necessary resources there immediately.”

Prior to Wednesday’s bullish news some industry veterans noted that indicators were already pointing to higher prices. In Tuesday’s trading the June contract settled lower by 10.1 cents to $9.780, but not until after recording a high of $9.955 in Nymex floor trading and $10.022 in Globex trading. “[Tuesday’s] advance to the highest levels since last Wednesday and the brief rally back to above the $10 mark in the June and forward contracts suggests some renewed bullish price momentum capable of keeping futures on an upward path through the rest of this week,” Jim Ritterbusch of Ritterbusch and Associates said Wednesday morning. The June contract on Wednesday recorded a high of $10.235 before closing out at $10.137, up 35.7 cents from Tuesday’s finish.

While the traditional withdrawal season is technically over, most people within the industry are looking for a withdrawal in the teens Bcf when Thursday morning’s natural gas storage report for the week ended April 4 is revealed. A Reuters survey of 21 industry players produced a range of withdrawal expectations from 3 Bcf to 25 Bcf with an average draw expectation of 13 Bcf.

Bentek Energy said its flow model indicated a withdrawal of 8 Bcf, which would bring stocks 28.4% below the five-year high and 1.4% below the five-year average. The research and analysis firm was looking for a 3 Bcf draw from both the East and West regions, while the Producing region removed 2 Bcf.

“As the withdrawal season comes to a close the U.S. stocks will fall 1.4% below the five-year average due in part to the 14.9% deficit to the five-year average in the West,” Bentek Energy said in its weekly Natural Gas Storage Outlook. “PG&E and Socal together are currently 43 Bcf below the level that they were last year and are starting to cover it by injecting a total [of] 3.1 Bcf this week.”

The number revealed by the Energy Information Administration (EIA) will be compared to last year’s 33 Bcf injection and a five-year average build of 15 Bcf.

Noting that it is not that uncommon to have a few withdrawals in April, Barclays Capital analysts George Hopley and Michael Zenker noted that the magnitude of storage changes at the turn of season are usually small enough to make little material impact on overall levels, but what matters is how soon or how late that change in direction takes place. They noted that a late-arriving winter managed to quickly knock 300 Bcf from end-of-March inventory expectations, letting the industry gently coast through the turn of seasons but with very tight inventories.

The analysts said that while October 2007 storage levels of 3,567 Bcf are almost out of the question, it might even be difficult to meet EIA’s end-of-injection-season storage estimate for 2008 of 3,455 Bcf. “It is not surprising to expect some level of underperformance, but there is a good chance that even reaching their projected level will be a challenge, in that it requires some method to make up at least 200 of the 300 Bcf lost,” the analysts wrote in a research note. “Our baseline projection is 3,350 Bcf for the end of October, close to the comfort range a few years ago but [not] low enough to keep summer prices elevated, especially considering how much storage space has been added in the past few years.”

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