May '13 natural gas futures moved strikingly higher today to approach highs not seen in 19 months. Storage data released by EIA earlier this week showed a drawdown of 94 billion cubic feet. This is winter's long tail swinging around to snap at the market.
Profit takers in long positions will likely continue to play these swings as this May contract has given them plenty of action. Volume was very high today as buyers saw an early morning uptick as an indication of where the contract was headed. That uptick, when taken in consideration with EIA's report that natural gas stockpiles have fallen below the five-year average made the move a cinch to call.
The contract is expected to remain above four dollars now until some meaningful weather data suggests these seasonal drawdowns are behind us. This is a weather rally at its finest. With a little luck, these prices should inspire production increases, but a rush to fill the chunk March took out of the national supply runs the risk of outrunning investor appetite for risk. If too much natural gas floods the market in response to drawdowns, the bottom could fall out of this May '13 contract.
May 2013 natural gas opened today at $3.93 and added $0.20 (4.64%) to set a new contract high at $4.13.
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