Looking like the readout on an EKG machine gone mad, natural gasfutures soared, dipped then rallied again yesterday as tradersdealt with a bevy of somewhat contradictory but certainly confusingpieces of fundamental news. With Wednesday’s 25.9-cent advance and$4.073 settle, the June contract climbed into the rarified air of$4.05-plus prices, which have been achieved only in seven othertrading sessions during the 10-year history of natural gas futures.

For the third morning in as many days, bulls were on theoffensive at the open. Not only did the $3.88 open create a gaphigher on the daily chart, but it also leap-frogged over keyresistance at $3.84. But unlike Monday and Tuesday, when earlybuying pressure was curbed by mid-morning profit-taking, pricescontinued higher until about 2 p.m. EST.

In what was likely the most volatile hour in the history of thederegulated spot market, prices dove then spiked fiercely inreaction to fresh storage news. According to the American GasAssociation, 55 Bcf was added to underground storage reserves lastweek, increasing the total working gas capacity to 1,218, or 37%full.

“There was a bad number circulating on the floor just before theactual AGA number was released, said Ed Kennedy of Miami-basedPioneer Futures. Rumors had it that 70 Bcf was injected. There wasmassive selling when the number hit the [Nymex trading] floor. Thenwhen traders realized the actual number was a 55 Bcf, they reactedby covering shorts and pushing prices higher,” he said. Afterdipping to notch a $3.855 low shortly before 2 p.m. EST, the promptmonth erupted almost 25 cents to a $4.10 high shortly after 3 p.m.EST.

Another factor that added to the market momentum wasoption-related buying by the sellers of $4 calls who suddenly foundthose calls to be in the money Wednesday, Kennedy added. “On theother hand, if you are a end-user and bought $4 calls a couple daysago, you have created a win-win scenario,” he continued.

In related news, the New York Mercantile Exchange set a dailyvolume record on Friday, May 18, with 43,688 natural gas optionscontracts traded, surpassing the record 43,534 contracts traded onJan. 31. That record was then broken again Monday when 52,625 gasoptions contracts were traded.

Futures spiked again in Access trading last night, reaching ahigh of $4.18 before slipping back to $4.15 at 7 p.m.

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