Amid muddled fundamentals and a rapidly improving technical situation, natural gas futures reversed direction Wednesday as local traders used Tuesday’s retracement as a springboard to new eight-week highs. A 10.8-cent gain in the September contract was trumped by an 11.3-cent rise in the October contract. The two months, which constitute the end of the seven-month summer strip and storage injection season, finished at $3.274 and $3.339 respectively. The only non-bullish factor Wednesday was estimated volume, which at 95,733 was a little on the low side.

Few traders polled by NGI were surprised by the rebound Wednesday. “Even though we finished near the low Tuesday, we made a higher high and a higher low,” a cash trader told NGI. “The bulls were and still are in control. If anything, the sell off Tuesday was healthy.” Another trader agreed, adding that by not dropping below the downtrend line in the $3.14-15 area, the market was still in an updraft Tuesday.

“I was a buyer at every level today,” said veteran local trader Sandy Trot shortly after leaving the ring Wednesday. “This market keeps looking better and better. We might sell-off to $3.05, but eventually, this thing is headed higher… The next stop is the [chart] gap up at $3.48-50–if not by the September contract, then definitely by the October contract.

“This is a different kind of rally than we have seen recently. It feels different than when we bounced off the $2.60s and $2.70s earlier in the month. Several of the clerks on the floor have mentioned taking orders from traders — both fund and commercial — that they have not heard from in six or nine months,” he said.

Another play that Trot is looking at is the January-April spread, which he has observed to widen each year around this time. “If you bought that spread at the end of August and sold it on Sept. 27, you made money each of the last 10 years,” he boasted. Calls are another way to make a dime, he continued. “The $7 January call is way too cheap to pass on right now. If prices move to $5 and the volatility continues to increase, you could make a killing.”

However, $7 calls and Jan-Apr spreads will take a back seat to some good old fashioned supply data set to be released this morning. The market’s narrow band of expectations is for a net injection of 40-45 Bcf, which if realized would be about half the 85 Bcf seen last year. Last week the Energy Information Administration announced a 53 Bcf injection, which surpassed the 46 Bcf injection from same week in 2001. In an early stab at next Thursday’s report, Thomas Driscoll of Lehman Brothers in New York looks for a 50 Bcf refill, which would fall short of the 74 Bcf comparison from last year.

Approaching the one year anniversary of the Sept. 11 tragedies, the New York Mercantile Exchange Inc. (Nymex) said Wednesday that it will hold a memorial service at 3:15 p.m. EDT on Sept. 5 for the 29 traders and related staff and former members and staff who died last Sept. 11. In addition, Nymex said on Sept. 11 it will hold a “staggered opening” of its markets, beginning at 11 a.m. EDT with the opening of natural gas futures, options, and calendar spread options, light, sweet crude oil futures, options, and calendar spread options, copper futures and options and platinum futures and options.

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