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Traders and market-watchers alike on Wednesday were trying to get a handle on exactly what was happening in energy futures as natural gas and crude soared higher once again. April natural gas gained 38.8 cents on the day to close at $9.741, while April crude got back to its recent record-setting ways by adding $5 to close at an all-time high of $104.52/bbl.

It’s not exactly going to be “warm” in northern market areas Friday, but the fact that it will be “warmer” was enough to cause prices to fall at all points Thursday. The previous day’s 1.2-cent decline by March futures added a small amount of negative guidance for the cash market Thursday.

Prompt-month natural gas futures shot exactly 18.1 cents higher for a second consecutive session Friday as traders and analysts debated without consensus the reasoning for the renewed bout of strength. After reaching a high of $7.985, the February natural gas contract — which expires Tuesday — closed out the day at $7.983, just a penny short of the previous Friday’s finish.

As natural gas traders put 2007 firmly in their rear view mirrors, the focus now surrounds what exactly might be in store for prices in 2008. With traders widely agreeing that the days of $2-3/MMBtu are long gone, whether 2008 sees $5-6/MMBtu gas or $7-9/MMBtu gas will be largely influenced by the weather picture and whether increased liquefied natural gas (LNG) cargoes find their way to North America’s shores.

As natural gas traders put 2007 firmly in their rearview mirrors, the focus now surrounds what exactly might be in store for prices in 2008. With traders widely agreeing that the days of $2-3/MMBtu are long gone, whether 2008 sees $5-6/MMBtu gas or $7-9/MMBtu gas will be largely influenced by the weather picture and whether increased liquefied natural gas (LNG) cargoes find their way to North America’s shores.

It’s not exactly free, but at 7 cents/MMBtu, the new all-time low cash quote reported Tuesday to NGI’s price survey for Rockies gas into Kern River, it’s very close to giving it away. Close behind was another record-breaking 8-cent quote for Cheyenne Hub. This follows on a 15-cent package that was sold on CIG as recently as last week (see Daily GPI, Sept. 5), which tied NGI’s all-time low cash quote established by both Kern River and Opal in April 2002 (the record also was tied in June of this year).

Does today’s gas market remind you at all of 2001? If you’re an energy analyst at Friedman, Billings, Ramsey & Co. (FBR) it does. In a new research note, a trio of FBR analysts enumerate exactly how the current market is like 2001, and how it’s not.

Given the massive gas storage surplus (50% above the five-year average), many market experts are wondering exactly how low gas prices will have to go in order for gas to begin replacing coal-fired generation this summer. That extra gas demand certainly will be needed. The question is whether it will be enough to slow storage injections so that producers won’t be forced to shut in their wells.

Every downtrend needs a good short-covering bounce now and again and that is exactly what it looks like February natural gas did on Friday, although it was a small bounce. After opening 32.1 cents higher Friday morning at $9.820, which also happened to be the contract’s high for the day, the prompt month traded in an area between $9.580 and $9.760 before settling at $9.632, up 13.3 cents on the day but $1.593 lower than the previous week’s close.