Taking most of its cues on Wednesday from crude oil and the election results, natural gas futures started strong before fading during the middle part of the session. However, December rallied in the last few hours of trading to settle up 18.5 cents at $8.752.

After bouncing off of the day’s $8.46 low five separate times, the natural gas prompt month went on to notch its high on the day of $8.78 before reaching its close. December crude finished the day back above the psychological $50 level at $50.88, up $1.26 for the day.

After overlaying the daily natural gas and crude futures charts for December, a Washington, DC-based broker deemed them “just about identical” for Wednesday’s trade. “Natural was a little more volatile in its moves, but everything was directionally following crude oil.

The broker reiterated the common belief that a George W. Bush election win would be bullish for energy prices. “It is believed that he will continue to fill the Strategic Petroleum Reserve and that he will also continue with the interventionist aggressive foreign policy in the Middle East,” he said.

In addition, the Energy Information Administration’s (EIA) crude inventory build came out much larger than expected. “That sold the markets off very hard for about 45 minutes…but then on Sen. John Kerry’s concession announcement, a little bit of a rally followed,” he said. “They paused during lunch time, but then the announcement of the Bush acceptance speech allowed the markets to continue chugging higher through the settle.” The broker added that there also was a refinery issue and a flare up in Nigeria that helped push crude higher. “At least for today, natural gas moved in tandem with crude stories.

“In terms of looking at the natural gas charts, the more we mark time above this $8.50 level here, the more it keeps strengthening this mini-plateau, making it tougher and tougher to break down and more and more likely that we would make a further thrust up from here,” the broker said. “I think if we put another leg in to the upside we will be more targeting that $9.505 high. Getting through the double-top at $9.20 would probably be the first hurdle it would have to clear. Our models show that if this move is going to have a fifth wave on the Elliot formation, it would be significantly above the $9.50 level.” That is still an “if,” he noted.

He added that while the market has not broken the much larger uptrend yet, it could be near. “I don’t know whether this corrective move has hit the support line and that will be all,” he said. “It could very well be that this is about as low as it goes before making one more push upward.”

Following news of significantly reduced Gulf of Mexico shut-ins on Tuesday (see Daily GPI, Nov. 3), the Minerals Management Service (MMS) kept things going in the right direction Wednesday. The MMS reported that natural gas shut-ins in the Gulf are down to 745.98 MMcf/d, which is 6.06% of the GOM’s normal daily output. For the period from Sept. 11 to Nov. 2, the MMS reported that 111.758 Bcf has been shut in, which is equivalent to 2.511% of the yearly production of gas in the GOM.

“Both on the crude side and on the natural side there have been significant shut-in improvements,” the broker said. “They obviously have fixed a very important part of the infrastructure because the MMS reported that almost a third of the supply is back. With shut-in supply coming back in the Gulf, one would think that some weakness would be allowed to come into the natural gas market. However, bull markets sometimes ignore bearish facts that are right in front of them. The MMS news Tuesday certainly didn’t get any play Wednesday with the rally we saw.”

The EIA will release its natural gas storage report Thursday morning. The report, which covers the week ending Oct. 29, will be compared to last year’s 34 Bcf injection and the five-year average build of 14 Bcf. The broker said he is looking for a 35-45 Bcf injection. Despite the sizeable margin over the five-year average, he questioned the report’s importance. “I just don’t know whether that is a market moving stat these days given the absolute level of storage,” he said. Stocks currently sit at 3,249 Bcf.

Citigroup’s Kyle Cooper is looking for a 36-46 Bcf build. He said this week’s storage report should lift inventories to an all time record, beating the current record of 3,254 Bcf (in the EIA weekly survey), which was established during the week ended Nov. 30, 2001. “Based on current forecasts, yet one more build after this week is anticipated and that should bring levels very close to 3,300 Bcf,” he said.

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