Buoyed by another price hike in the nearby crude oil market, the natural gas futures market continued its run higher Wednesday to notch a new two-month high. However, concerns that Thursday’s storage report will be a wet blanket for the market were enough to temper the bulls enthusiasm and the April contract only managed a 3.4-cent advance to close at $5.722. At 57,623, estimated volume was relatively weak, confirming the idea that traders chose to remain on the sidelines during the trading session.

Sources polled by NGI Wednesday continued to point to the strength in the crude oil market as a primary driver to the increases in natural gas. April crude gained 70 cents to climb above the $38/barrel mark for the first time in a year Wednesday on supportive supply data released by the Energy Information Administration and the American Petroleum Institute.

“It has been a long time since we have seen this sort of strength in crude oil,” said Tom Riley of West Virginia-based Petroleum Development Corp. “You have to go out to the summer of 2006 to find a contract priced under $30 a barrel.”

For Riley, the strength in crude played a central role in the gains in natural gas. “The natural gas strip is also very strong. This is not unlike the set-up we saw last spring.”

But while the price level and structure of the natural gas futures contracts might resemble the market of a year ago, the storage situation remains notably dissimilar. Pressured by a long cold winter of 2002/03, storage inventories this week a year ago were 736 Bcf and falling. By the end of the withdrawal cycle they would bottom out at the 642 Bcf — roughly 350 Bcf less than the expected ending inventory this year.

Expectations for the EIA’s storage report on Thursday call for a 25 to 70 Bcf build, which would fall neatly between the last two weekly draws of 96 and 28 Bcf respectively. Versus historical numbers, however, a draw in the 25-70 area would fall bearishly short of the 82 Bcf takeaway a year ago and the 81 Bcf five-year average. At 1,143 Bcf, storage currently stands 407 Bcf above the year ago level and 103 Bcf less than the five-year average.

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