After apparently disconnecting from crude oil futures on Friday (see Daily GPI, May 24), the June natural gas futures contract reestablished a link with its big brother Monday as oil supply fears compounded by a platform shutdown in the Gulf of Mexico on Saturday helped push crude and natural gas significantly higher.

The gas prompt month made a new June high of $6.730, blowing through the old high of $6.57 set last week and the $6.65 Fibonacci mark without much trouble. June natural gas futures closed at $6.705, or about 35.2 cents more than Friday’s close.

The July crude futures contract hit a high of $41.82 Monday before settling at $41.72, up $1.79 compared to Friday’s settle. The $41.82 high of the session fell just three cents short of the $41.85 all-time high struck on May 17.

Shell’s Mars platform was shut down Saturday after a “sheen [of oil] was observed on the water” surrounding the platform, a Shell spokeswoman said. The leakage was found to be coming from a failed flex joint. At the time of the shut-in, Mars was producing 150,000 b/d of oil and 170 MMcf/d of gas. The company was uncertain when the platform would be returned to service.

The smart traders used Sunday night’s Access session to do their buying ahead of the price spike on Monday. One trader noted that there were more than 5,000 contracts traded during an “unusually strong” Access session Sunday night.

Excluding the Shell platform incident, many expected natural gas futures to move higher anyway because the prompt month was able to close up 2.9 cents at $6.353 on Friday despite an 87-cent crude futures sell-off.

“Gas, as well as crude, got to ride on the Mars platform shutdown story a little,” a Washington-based broker said. “This platform is critical in sending crude oil to Gulf Coast refineries. It’s a lynch pin-type facility that is used by other people than just Shell.

“[OPEC] kept telling us that higher prices were a result of our infrastructure capacity problems,” he added. “If you have a breakdown in a critical link in that infrastructure, well, this is what you get, I guess.

“Clearly, the gas bears failed to punch it down this morning,” he added. “I think tomorrow you might be seeing a lot of the bears doing a mea culpa and saying ‘ok, I’ve got to be a bull now’ with the strength that we’ve seen here.”

The broker said the question now is whether the market is pricing out any demand at the current price level. “I don’t know the answer to that yet because we are sort of in this new ‘higher prices for everything’ environment,” he said. “Breaking through the $6.65 level puts to rest — at least in the immediate term — the bear potential on the natural gas chart.”

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