A casual observer looking back at yesterday’s natural gasfutures trading might take notice of the somewhat narrow 14-centtrading range and not-so-uncommon-lately 12.1-cent prompt monthgain and conclude that Wednesday was just another ho-hum day at theNew York Mercantile Exchange.

They couldn’t be more wrong.

In a trading period that will not soon be forgotten by bull norbear, October topped $5.00, then dropped down to etch is daily itslow, only to bounce right back up to set its daily high — allwithin 15 minutes.

As usual the weekly release of fresh storage data was the activeingredient in Wednesday’s trading mix, as traders reacted bullishlyto another smaller-than-expected injection announced at 2:00 p.m.(EDT). According to the American Gas Association, 42 Bcf was addedto underground storage facilities last week, bringing the totalworking gas in storage to 66% full at 2,186 Bcf. Because thatinjection figure not only fell short of last year’s 66 Bcf build,but also the range of preliminary estimates centered on 45-55 Bcf,it was met with strong buying interest during the last hour oftrading yesterday.

Several traders were surprised not just by how the refillstacked up against historical injections seen this time of year,but also because the conditions have been ripe for the market toput more gas in the ground. “The build was less than the weatheralone suggested, leading us to believe that the high price levelsare inhibiting the flow into storage as buyers are reluctant to payup,” the Pegasus Economic Group wrote in its NatGas Reportyesterday.

A Houston-based risk manager agreed that the low injectionscould be partially attributed to sticker shock. “The cash tofutures spread has blown out from less than a nickel to more than adime and we are still not injecting gas into the ground. Economicshold that with the forward cost of carry easily covered, everymolecule that can go into the ground will do so. There is notightness of supply in the cash market. People are just unwillingto pay $5.00 for their storage gas.”

He may have a point because based on daily numbers yesterday,there was a more than 15-cent differential between Henry Hub cashfor September and October futures and almost a 25-cent spreadbetween cash and November futures. Comparatively, the average costof carry in the producing region is roughly 3 cents a month, whichincludes the time value of money plus associated storage fees.

While bullish in the long run, Pegasus is bearish in the nearterm because Wednesday’s break to new highs created bearishdivergence on the hourly Relative Strength index. “Minor support at$4.955 may be vulnerable, with a break sending October natural gasto failed resistance at $4.865 or back to the $4.74-741 lows fromlast Thursday and Friday as recent weak longs head for cover.”

Beginning at 4 p.m. today the Nymex Access electronic tradingsessions for natural gas as well as light sweet crude oil, heatingoil and gasoline futures will be extended to run from 4 p.m. (EDT),Mondays through Thursdays, to 9 a.m. the following day. On Sundays,the session will begin at 7 p.m. and will run until 9 a.m. onMonday. Currently, the sessions for light sweet crude oil, heatingoil and gasoline begin at the same times but close at 8 a.m.Natural gas futures and options currently are traded from 4 p.m. to7 p.m. Mondays through Thursdays with no Sunday night session.

In addition, the open outcry session for natural gas futures andoptions has been moved up 30 minutes earlier and will open at 9:30a.m. (EDT) beginning Friday (see Daily GPI, Aug. 4).

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