Recovering from Thursday’s 30-cent swoon and giving the recent rally a second lease on life, October natural gas futures pushed higher again during Friday’s regular session to close at $3.778, up 32 cents from Thursday’s finish and 81.8 cents higher than the previous week’s close.

The prompt-month contract notched a high of $3.838 before shaving a few pennies to close. Despite the rebound, some market watchers were eager to point out that Friday’s action failed to test Thursday’s five-week high.

“While Friday could definitely be labeled a ‘positive day,’ October’s failure to reach Thursday’s $3.900 high certainly calls into question the current strength of the rally,” said a New York broker. “It will be interesting on Monday to see whether that $3.900 number can be tested and taken out. The fundamentals say no, but stranger things have happened in this futures market, and I’m talking about even over the last few weeks.”

Citi Futures Perspective analyst Tim Evans said that while the recent show of strength has been impressive, he still believes it is largely short-covering. “The natural gas market is on the rebound, with the bulls seemingly back in control and able to reassert that the smaller-than-expected 66 Bcf net injection to U.S. natural gas storage for last week ‘was so too bullish,’ as if in a playground dispute,” he said. “The temperature outlook is slightly warmer than it was a day ago, but the largest variances [this] week are expected in the northern Rockies where they won’t have much of an impact on population-weighted degree day accumulations. Otherwise, although we’ve made the case that a seasonal shift in focus is under way and that the larger fundamental balance has tightened to the degree that could constitute a tipping point, the surge in October futures over the past two weeks continues to resemble a hurricane-induced short-covering spike, just without the inconvenience of an actual storm.”

With little in the way of fundamental news to impact the market, the large price swings of recent sessions had their origins in large speculative trading, an observer said. “The fact that values have managed to pop more than 25% during the past couple of weeks amidst negligible bullish developments from the weather factors would suggest a broad-based strategy in which the large speculators are adjusting positions ahead of the upcoming winter season,” said Jim Ritterbusch of Ritterbusch and Associates.

The full impact of these adjustments may not be known until this week as last Friday’s Commitments of Traders report includes data only through Sept. 15. Thus Wednesday’s 44-cent price surge and Thursday’s 30.2-cent contraction will not be in the data.

Prior to Friday’s action, Ritterbusch said he viewed Thursday’s sizable 45-cent sell-off from high to low in the face of a bullish storage report as an indication that this short-covering spree may have run its course. “While allowing for a possible rebound back toward the $3.750 area, we still anticipate a return to a $2 handle as early as [the coming] week, assuming that the Atlantic remains exceptionally subdued,” Ritterbusch said in a Friday morning note.

Meteorologists are scratching their heads over the lack of tropical activity in the Atlantic. “Considering that we are very close to the peak of hurricane season, at least according to climatology, the tropical Atlantic is extremely quiet right now. It also doesn’t appear that the United States has too much to be concerned about as far as tropical weather for the near future,” said AccuWeather meteorologists Bob Smerbeck and Jack Boston.

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