Taking a break from following crude’s recent mad dash higher, May natural gas futures on Friday shrugged off June crude’s enormous gains to explore slightly lower levels. Reaching a low of $7.830 on the session, prompt-month natural gas went on to settle at $7.981, down 8.3 cents on the day, but 84.6 cents higher than the previous week’s close, which occurred Thursday, April 13 in observation of Good Friday.

Friday’s trade action was significant in that traders were able to decouple the two energy markets from one another. While natural gas settled slightly lower Friday, June crude — in its first regular session as prompt month — jumped $1.48 to close at a new all-time high of $75.17/bbl.

“The natural gas market definitely tried to unhook itself from crude Friday. We are still pushing the Btu spread to its limits,” said Brad Florer, a broker with ICAP Energy. “We clearly were not following along Friday. We still have a significant amount of gas in storage, so maybe that becomes the trump card as to where the price ceiling is.

“For most of this year, the natural gas futures market has had a sideways movement with downward gravity. We are now looking at the flip side, where there is an upward bias going into the summer with heat and hurricane concerns,” he said. “Historically, this early-year rally normally tops out in May, so we are likely looking at a couple more weeks of strength.”

On an MMBtu basis, June crude settled Friday at $12.528, marking a Btu spread of approximately $4.547 over May natural gas’ close. “The historic all-time high Btu spread is around $5.05 to $5.15, which we bumped up against sometime earlier this month,” Florer said. “We are still within the confines of the spread, but we are definitely testing the limits. With all this tension in place regarding the situations in Iran and Nigeria, I’m not sure where the lid is on the crude market. I’ve heard Elliot Wave technicians talking about $85/bbl as the end of the last wave up.”

The Elliott Wave model holds that markets move either up or down in a series of five waves, three in the dominant direction (1, 3, and 5) and two (2 and 4) in the opposite direction. In this case, waves 1, 3, and 5 are up waves.

Short-term traders continue to focus on the crude oil market. “Traders knocked the market down Thursday when the [47 Bcf natural gas storage] injection number came out, but the firmness in the crude and products helped support the market,” said a New York floor trader.

A market technician on Thursday suggested that the market is currently forming a short-term bottom. “With the trading range [on Thursday] within the high and low of the prior day (including Access trading) for the first time in over a month, the trend can be in a congestion period,” said Walter Zimmerman of United Energy. Zimmerman, an adherent of the Elliott Wave model, said the current slide in natural gas prices is a wave 4 (down) and that “the fourth leg of a five-wave rally can correct 38.2% or up to 50% of the third leg.” The third leg is defined as the move from $6.65 on April 13 to the high of $8.28 posted Wednesday. “This labels our support targets as $7.660 and $7.465. So based on the current wave count, we label the short and intermediate trends as bottoming,” he suggested.

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