Instead of focusing on Thursday morning’s natural gas storage report for the week ended March 25, energy traders were fixated on a new research report from Goldman Sachs predicting that the oil market has entered a “super-spike” period that could see prices surge as high as $105/bbl. The firm also said Henry Hub natural gas prices could soar to $13/MMBtu by 2007 (see related story).

As a result, all the energies surged higher in Thursday trading. May natural gas futures started the day higher and never looked back. After etching out a high of $7.74, the prompt month ended up settling at $7.653, up 19.3 cents on the day. May crude settled $1.41 higher at $55.40/bbl, while April heating oil expired 5.1 cents higher at $1.6576/gallon.

At 10:30 a.m. EST, the Energy Information Administration (EIA) reported that 51 Bcf of natural gas was pulled from underground storage, far outpacing last year’s 25 Bcf pull for the week as well as the 24 Bcf five-year-average withdrawal. Despite the fact that the withdrawal came in slightly less than the industry consensus, the prompt month decided to side with the bullish historical comparison and the surrounding background noise and jump higher.

“Right now, natural gas futures is being ruled by the technicals,” said Ed Kennedy of Commercial Brokerage Corp. in Miami.

But in addition to the technical buying pressure, natural gas futures also appear to be receiving a boost from the petroleum complex. “Part of the background noise is this asinine projection by somebody at Goldman Sachs that crude oil could hit $105/bbl,” Kennedy said. “They better watch themselves. If there is even a hint of them trying to manipulate market prices they are in deep trouble. I’ve been a technician for 35 years… You cannot predict a super-spike! I have no idea what they are talking about.”

Advest Inc.’s Jay Levine said the upside risk in the whole energy complex has been here for longer than many would believe. “Now, you have everyone and his mother — literally — jumping on board the panic-train as the screen screams higher, leaving many behind and just as many left scratching their heads,” he said. “The media, through no fault of their own, adds fuel to what already is a fire in progress helping to make this a self-fulfilling prophesy whether it’s fundamentally justified or not.”

Levine said the only arguable point that makes any sense to him is “how much risk (it was always greater up than down in my opinion) and how high (can prices go)? For many of my clients, fundamentals is becoming a dirty word.”

Kennedy said that although the bulls are firmly in control, he would not be surprised to see some profit-taking with natural gas futures at its current price level. “There is good support in the upper $7.40s and lower $7.50s and I expect that the market would hold there. There was fund buying [Thursday] and they are in control [of the market].”

He admits that his bullishness flies in the face of the bearish fundamental data out there right now. “I am a market technician. Sometimes you have to forget what you believe and believe what you see,” he remarked. He was also quick to caution those looking to bet against the current trend. “He who picks a top, sits on a volcano.”

Instead, Kennedy is advising his end-user customers to take advantage of the relatively low implied volatility out there right now by purchasing some call options. “I would look at calls for the May, June, July timeframe. Purchase an outright call at the price level you absolutely have to protect. By doing this you are creating a win-win proposition. If price go higher you are covered, if they go lower, you gain by being able to purchase cheaper gas in the cash market.”

As for the storage report, Kennedy called it “meaningless” because he believes the market will see its first injection of the season next week. “There is a sufficient quantity of gas in storage to handle any cold snaps that might occur in early April,” he said. “That is all we need to know.”

Working gas in storage now stands at 1,239 Bcf, according to EIA estimates. Stocks were 222 Bcf higher than last year at this time and 206 Bcf above the five-year average of 1,033 Bcf. The East region saw 44 Bcf removed for the week, while the West and Producing regions declined by 6 Bcf and 1 Bcf, respectively.

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