After trading higher in the overnight Sunday Globex session, May natural gas futures burst even higher during Monday’s regular session, recording a high of $11.360 before going off the board at $11.280, up 31.7 cents from Friday’s close. With the May contract expired, attention now turns to June futures, which peaked at $11.455 on Monday before settling at $11.329, up 22.8 cents from Friday’s close.

Data on the historical charts gets a little murky at the current lofty price level, because the last time these values were seen was back in December 2005 when the Hurricane Katrina premium was coming out of the market rapidly. With gas futures trading in the $11.20s and $11.30s, the market is currently in a gap created from the Dec. 23, 2005 low of $11.950 and the Dec. 27, 2005 high of $11.225.

“The $11.360 high Monday came very close to reaching our $11.378 resistance level,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Strength in the petroleum market is certainly not hurting this run-up in gas. Natural gas followed crude on its first up move, then sort of divorced itself while crude bounced up and down through the session.” June crude on Monday soared to a $119.40/bbl high before retreating to close at $118.75/bbl, up 23 cents from Friday.

“I think the cooler temperatures in the Northeast are helping drive natural gas higher. On top of that there is still the thought in the back of peoples’ minds that storage refill is going to be a problem,” Blair said. He added that the trouble at Enterprise Product Partners’ Independence Hub in the Gulf of Mexico certainly isn’t helping the situation (see related story). “The original repair time estimate placed repair as taking as long as four weeks, which would have put the hub back on-line during the first few days of May. Now they are saying it will be repaired during the first half of May. That did not help the market at all,” he said. “In addition, there is the whole situation of LNG heading to more attractive price markets, which is not helping the U.S. supply picture. All of these things are not helping to keep the market grounded.”

Blair noted that Monday’s trading was also interesting because it did not act as a peaking move. “We got over $11, which was a pretty key resistance level, and then we kept moving higher from there. While I wouldn’t be surprised to see some pullbacks to around the $11 area, we’ll likely move right back up again. This isn’t acting like a market that wants to come down right now.”

Going into Monday’s session, market technicians saw no hint that the rampaging bull was in any danger of being corralled any time soon. “Last week’s report pegged $10.940 the only potential resistance of any consequence before the $11.300-11.500 area,” said Walter Zimmerman of United Energy. The strong finish of May futures last week was impressive; May settled at $10.963, up 17.3 cents in Friday’s trading. “Last week [prices] rallied to a $10.980 [intraday] high and a strong close with no hint of peaking action. This $11.300 area has been our most bullish case target for natgas since the rebound from the $6.838 low held above our most bullish case support at $6.535 (0.618 of $5.192 to $8.712).”

Zimmerman uses Elliott Wave and retracement analysis to make his projections, and his price targets are derived from matching wave and retracement patterns to current market trends. “The $11.300 marks the 0.618 retracement of the entire $15.780 to $4.050 decline and a decisive close above $11.300 would open the door to a test of the 0.7862 up at $13.275,” he said in a Monday morning note to clients.

Although weather conditions are generally not considered market-moving factors at this time of year, traders are paying attention to factors that may inhibit a timely increase in supplies for next season. Forecasters are calling for below-average temperatures across much of the U.S. In his 10-day temperature outlook meteorologist John Dee says, “Below-average temps will dominate much of the U.S. for much of this week and even into next week.” Dee expects a two-day “bubble” of warm air to work its way across the country, and says, “The largest cold departures will be found from the Rockies to the Appalachians, where some double-digit values could bring about some late season demand for heating energy across the North. In the South, the cooler than average temps overall will lead to smaller than average demand for cooling energy for much of the next week to 10 days.”

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