Shooting higher in Access trading and again in the regular session, November futures on Wednesday morning broke through the psychological $7 level and kept on going.

Seeing its first action as prompt month, the contract traded 55.9 cents higher in overnight trade. The trend continued in the regular session, moving up to trade at $7.24 as of 10:30 a.m. (EDT), an 88.9-cent premium over Tuesday’s close. November closed on Wednesday at $6.911, up 56 cents on the day.

Many market brokers polled by NGI were scratching their heads over the tremendous market move. “There’s word that the run-up might have something to do with a new bullish winter forecast that hit the street,” said one broker. “We are also hearing rumors that there is newly discovered damage on a rig in the Gulf of Mexico from Hurricane Ivan. Right now, I don’t know.”

In its latest 30-to-90 day forecast, State College, PA-based AccuWeather.com predicted the potential early start to winter for parts of the country (see related story). On the Ivan shut-in front, 2.3 Bcf/d remained offline on Wednesday, raising the total deferred production to date from the storm to 55.539 Bcf.

Another prevalent theory was that the natural gas complex had hitched its wagon back to crude futures after decoupling a few months ago. November crude, which eclipsed $50/bbl again on Wednesday, settled down after the oil stock reports revealed a surprise build. November crude futures closed down 39 cents at $49.51/bbl.

For Nymex local trader Eric Bolling, Wednesday’s run-up was built on fund and commercial short-covering resulting from a combination of bullish factors. “We continue to get reports that the damage in the Gulf of Mexico is worse than first thought and that it may be a while before the bulk of that supply returns to the market… Along with the uncertainty over crude oil prices, the uprising in Nigeria, it makes this a market [in which] you don’t want to be short,” he said.

A bulk of the day’s gains, Bolling told NGI, occurred in early morning computer-only Access trading. “We were up 15 cents early this morning. By the time I had driven to [Nymex], Access was trading 35 to 60 cents higher,” he said.

At 10 a.m. EDT, the regular open-outcry session opened at $6.91, up 55.9 cents from Tuesday’s close. Although the fund buying continued in the morning, Bolling noted that it takes more volume of buying to move the market during the regular session. “We should see some hefty volume figures posted [Wednesday].” The day’s estimated volume came in at 106,925.

But despite the 98-cent run-up over the last two trading days, he is not prepared to jump in front of the freight train and initiate an outright short position. “There may be a great opportunity in both crude and natural to get short, but that time is not now…The market will tell you when it is time.”

Other market participants looking for explanations came up with little to show for their efforts. “Everybody is still scratching their heads as to why it was so strong,” a Washington, DC-based broker said. “If you can’t beat them, join them. It will be interesting to see what kind of storage number we get tomorrow because maybe that will shed some clarity. I just think the herd went off at the same time.”

She added that there wasn’t any “concrete story” or “pearls of wisdom” circulating that would make her feel better about the huge run-up. She speculated that some of the buying interest could be directly related to Gulf production shut-ins. More producers might be entering the futures market to hedge physical purchases because of expected shut-in supply next month. However, she added that scenario would be a short-term phenomenon, noting that this move was “back throughout the curve.”

In response to recent volatility, the New York Mercantile Exchange announced Wednesday that it will change the margins on its Henry Hub natural gas futures, swap futures, and e-miNYsm futures contracts at the close of business Thursday.

The margins on the first month of the standard-sized futures contract will increase to $5,500 from $5,000 for clearing members, to $6,050 from $5,500 for members, and to $7,425 from $6,750 for customers. Margins on the second through fourth months will increase to $5,000 for clearing members, to $5,500 for members, and to $6,750 for customers. Margins for the fifth through the 29th months also went up, except for the sixth month and the 14th-18th month stretch, which will decrease. The margins on all remaining months will remain unchanged.

While many questions about the price increases circulated Wednesday, the Energy Information Administration’s Thursday storage report will be the next event on everyone’s radar. Tim Evans of IFR Energy Services is calling for a 70-80 Bcf net injection, while Citigroup’s Kyle Cooper is looking for a build between 68 and 78 Bcf. Whatever Thursday morning’s natural gas storage report for the week ended Sept. 24 reveals, it will be compared to last year’s 101 Bcf injection and the five-year average build for the week of 74 Bcf.

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