Following through on leftover momentum from Friday and a renewed burst of strength from the neighboring crude futures market, natural gas futures sprung above $11 on Monday to record a $11.210 high before closing out the day at $11.178, up 40.1 cents from last week’s close.

After trailing lower over the last week or so, the stiff rebound in crude was being cited for the renewed push higher in natural gas prices. Front-month crude futures set yet another all-time high on Monday as the May contract punched above $120/bbl to record a high of $120.30/bbl before closing out the regular session at $119.97/bbl, up $3.65 from Friday’s close.

“Crude made new all-time highs Monday, and I think the enthusiasm bled over into natural gas futures,” said a Washington, DC-based broker. “June natural gas was extremely strong. We had some of our producers interested in locking in price, but I am not so sure they ought to — not with the continued strength we have here. As is, natural gas is so cheap relative to oil that it has to do something to kind of keep up here.”

The broker noted that traders are citing the usual suspects for the renewed strength in crude. “People are pointing to stability concerns in Nigeria revolving around the trial of a ‘rebel.’ There is a lot of concern that there will be retaliation, which of course would be bad for oil,” he said. “People are also focusing on the weak U.S. dollar, strong euro and strong crude demand. I don’t know where people are getting the strong demand from, especially since we started to see some softening in demand from the federal inventory numbers last week. So we have all of these real and exaggerated reasons why crude prices might still head higher, and now all of the energy analyst gurus are talking about $125/bbl and $150/bbl target prices.”

Looking at resistance levels for natural gas, the broker said $11.650 and $14.620 are both Elliot Wave objectives, but the $14.620 might not be for this rally. “The problem is, we just don’t see how this gets better. We are going to start to get into warmer weather, which will spark some cooling degree day demand for natural gas, and then of course we have hurricane season. Until we start seeing a real softening in demand and consumption, I just don’t know how this gets better. We remain on the bull side at this point, because I don’t know what other choice we have.”

Others pointed out that supportive weather forecasts were also keeping prices propped up. Citigroup analyst Tim Evans said the Frontier Weather six-to 10-day outlook for May 10-14 calls for below-normal temperatures for the Midwest and Northeast and above normal conditions in Texas and Louisiana. Normal readings are expected elsewhere. In the 11- to 15-day forecast covering May 15-19, temperatures are expected to average warmer than normal from California to the Gulf Coast, with normal readings elsewhere.

Evans also highlighted the crude/natural gas relationship. “The natural gas market has also jumped, getting a sentiment boost off the rally on the petroleum side and some support from the updated temperature outlook, which features below-average temperatures in the Midwest and Northeast for the six- to 10-day period. At this time of year this won’t generate that much heating demand, but it may be enough to help hold prices within their recent range a while longer.”

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