Propelled by a tropical depression swirling in the Bay ofCampeche and concerns of yet another bullish storage report,natural gas futures spiraled higher yesterday as traders coveredshort positions. That buying interest pushed the September contractto $2.805 — the highest mark for a spot month contract sinceDecember of 1997 — before settling at $2.792 for the session.

“An amazing turnaround,” exclaimed a Houston risk manager whowas almost incredulous of the 15-cent price move from Tuesday toWednesday. “Over-the-counter was being offered at $2.66 [Tuesday]morning and now prices are $2.80.”

However, he feels that despite the “false” breakouts both higherand lower, the $2.70-80 range continues to hold the market incheck. “We have settled within that 10-cent range for the lasteight trading sessions.” But by later on yesterday evening the$2.70-80 trading range appeared to be in serious jeopardy as theSeptember contract added to its 8.4-cent gain by posting a 5.8-centadvance to $2.85 in after-hours Access trading.

Another trader admitted that preliminary speculation, whichcalled for another low storage injection, prodded the markethigher, but it was short covering on the news of two storms thatgave the market the impetus to set new highs. The NationalHurricane Center (NHC) is tracking two Atlantic storms. As of 5p.m. (EST) Tropical Depression 3 was located in the Bay of Campecheabout 310 miles east-southeast of Tampico, Mexico and had maximumsustained winds of 35 mph. Meanwhile, a strong tropical wave hadformed off the coast of western Africa and has the potential todevelop into a tropical depression in the next couple of days, theNHC reported.

Just about the time the market was digesting the weather news,the American Gas Association (AGA) landed a bullish blow of its ownannouncing that only 51 Bcf had been added to underground storagefacilities for the week ending Aug. 13. That refill not only fellshort of last year’s 76 Bcf figure, but also was at the lower endof market expectations in the 45-65 range. The year-on-year deficitnow stands at 142 Bcf.

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