Highs

Following a three-day, 13.5% decline off last Wednesday’s highs, natural gas futures checked quietly sideways Tuesday as locals picked each others’ pockets and bulls waited in anticipation of supportive storage news due out Thursday. As evidenced by the strong interest in the out months, strip buying was seen to lift prices at the closing bell. The December contract finished 2 cents higher at $3.883. The 12-month strip, meanwhile, advanced 3.6 cents to finish at $3.868.

After rallying to new 15-month highs Monday on renewed hurricane-hype, natural gas futures reversed lower Tuesday on reports from the National Hurricane Center that Isidore will only be able to reach category 1 hurricane status when it slams into the central Gulf Coast late Wednesday or Thursday. That selling was enough to pressure the October contract down to a new one-week low at $3.71. The prompt month closed a few pennies above that level at $3.742, down 23.6 cents for the session.

After posting a negative open, natural gas futures rebounded strongly Tuesday to notch its fourth-straight higher close, as both speculative and commercial traders loaded up on long positions in anticipation of the formation of Tropical Storm Isidore in the Caribbean. As it turns out, that buying was enough to press prices to a new four-month high at $3.695. Slipping only slightly to close at $3.679, the October contract finished 24.9 cents above its earlier low and 17.2 cents above Monday’s settle. Estimated at 113,063, volume in the gas pit was extremely heavy.

In sympathy with a late rally experienced by the rest of the energy complex, natural gas futures surged higher into the close Monday, as speculative fund and local traders covered shorts and propelled the market to its fourth-straight gain. After gapping lower at the opening bell, the momentum quickly turned in bulls’ favor as buyers stepped up and pressured the March contract through key technical levels at $2.16 and $2.21. Sellers backed away once the market had pierced $2.21, leaving buyers little choice but to bid up the market higher. The March contract finished at $2.286, up 9.5 cents or 4.3% for the session.

After extending to fresh four-week highs for the second session in a row Wednesday morning, natural gas futures prices shuffled lower in the afternoon in reaction to the news that a whopping 63 Bcf was added to underground storage facilities last week. The November contract finished almost 30 cents off its $2.69 opening trade, closing 17.4 cents lower at $2.418.

Adding to gains achieved Monday, natural gas futures extended to new three-day highs yesterday, as traders grappled with the first onslaught of chilly weather across the Midwest and Northeast U.S. The buying pressure was evenly distributed through the trading session, leaving the November contract with a 11.8-cent gain to finish at $2.388. The entirety of the winter strip lagged the prompt month only slightly, advancing 9.2 cents to finish at $2.778.

The American Gas Association reported a 95 Bcf injection into the nation’s natural gas storage facilities last week, which compares to a 72 Bcf injection during the same week a year ago. The injection came in slightly above consensus estimates around 85 Bcf and should be a bit of a reality check for traders caught up in the hype surrounding the impact the terrorist attacks might have on international crude supplies. However, the New York Mercantile Exchange remains closed and there was still no word yesterday evening on whether the exchange would attempt to open its doors on Thursday (see related story).

Due to the increased natural gas demand in the country sparked by new gas-fired generation coming online, the United States is experiencing the largest wave of pipeline infrastructure expansion since the early 1960’s , according to a recent advisory from Industrial Information Resources Inc. (IIR). The consultant group said it expects 25,000 miles of gas transmission pipeline will be constructed by 2010 and an additional 13,000 miles by 2015, with estimates ranging up to 275,000 miles or more of distribution pipelines.

Building on modest short-covering related advances achieved Friday, natural gas futures plowed higher yesterday as traders returned to the office to find that meteorologists had not backed away from their forecasts calling for hot temperatures across an extended area of the country over the next 10 days. With that, the September contract took over as the prompt month at Nymex with a neat, 15.9-cent gain to close at $3.353.