May natural gas futures were able to shrug off potentially bearish news and closed at a new all-time high Wednesday for the price advance that began in December. The May contract rose 17.4 cents to $10.781 and the June contract added 18.3 cents to settle at $10.946. June crude oil gained 23 cents to $118.30/bbl.

The outage outlook of the titanic Independence Hub in the Gulf of Mexico has not changed, and repairs originally estimated to require one to four weeks are on schedule to be completed in the next two weeks, Enterprise Product Partners LP, the majority owner, said Wednesday. The loss of approximately 900 MMcf/d had been an inspiration to market bulls, but Wednesday’s announcement of a timely completion of repairs was no deterrent to buyers.

Traders are looking for a confluence of fundamental and technical factors indicating an end to the strong market advance before initiating any selling. In late December 2007 the market began a yet-to-be-finished five-wave advance in the eyes of those who follow Elliott Wave analysis. “The last part of wave five began in mid March, and we are looking for fundamentals and technical factors to combine to indicate a market top,” said a Washington, DC, broker. He added that “if there had been a moderating weather pattern, the Independence Hub returning along with new productive results of the Marcellus Shale in Pennsylvania, and all these bearish factors at the same time the fifth wave is stalling out, then you have people from both the fundamental camp and the technical camp saying ‘I think I ought to sell now’ and that is what gets a more significant correction.

“I may be a market technician, but more people trade fundamentally, and you have a higher degree of confidence in a forecast when you have a number of factors agreeing. The only problem is that by the time they all agree, the market move is [often] over. We are still counting the market as the final spasm of an advance, and we [eventually] expect a more significant correction, more than just a correction within a bull market rally.”

One fundamental factor that will fall into place tomorrow is the 10:30 a.m. release of Energy Information Administration gas inventory data. Expectations are that the increase will fall below long-term trends. The five-year average is for a build of 46 Bcf, but last year no Bcf were injected. A Reuters poll of 22 analysts revealed a range from a 21 to 40 Bcf injection with a median estimate of 30 Bcf. A Dow Jones survey revealed an average 29 Bcf build.

For the moment the storage data is the most prominent piece of fundamental information in play. Near-term weather is not a factor, and longer-term weather outlooks, including tropical forecasts, are not considered reliable. Crude oil is often looked at for price guidance during shoulder periods, even though crude and natural gas are not substitutable commodities, and traders cite no more than a 50% historical price correlation. A more useful analysis is the overseas price of liquefied natural gas (LNG), often priced relative to crude oil. A weak U.S. dollar has currently placed the European price of regasified LNG at about $11.50/Mcf to $12.00/Mcf, clearly too high to sway cargoes of LNG to U.S. shores.

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