After carving out a 19-cent range in the first 90 minutes of trading, the natural gas futures market moved quietly sideways Tuesday as traders deliberated over the clash between short-term bearish factors and longer-term (bullish) uncertainty. The June contract closed at $6.056, up 4.1 cents for the session, and more than 15 cents above its morning low at $5.90. At just 57,635, estimated volume Tuesday indicated a quiet futures pit with action led by local traders.

Few traders were surprised by the morning rebound Tuesday, chalking it up to a correction following a three-day, 43-cent decline off last Wednesday’s $6.44 high. After a gap lower at the open, the June contract shot higher early in the session, but quickly topped out at the $6.09 mark. Sensing the lack of buying support at that level, locals were quick to shed their length. By 11:20 a.m. EDT the June contract had reversed and was testing new lows for the session.

Several traders polled by NGI were quick to point to bearish weather forecasts as a reason for the mid-morning sell-off. According to the latest six- to 10-day forecast released Tuesday by the National Weather Service, it will be a mild Memorial Day weekend and beyond for people in the southeastern quadrant of the country. Specifically, below-normal temperatures are predicted for May 26-30 for a large, rectangular swath of the country extending from Pennsylvania to Nebraska to Texas and back across to include central and north Florida.

As is usually the case, talk about the upcoming storage report will dominate trading floors Wednesday. Most expectations call for an injection in the 78-90 Bcf range. Last year at this time, the market injected 68 Bcf and the five-year average is calculated as a 78 Bcf refill. Last week, the EIA gave traders a mixed bag of storage news by announcing a bullish storage injection and a bearish storage data revision.

According to the EIA, 72 Bcf was injected into underground storage facilities during the week ending May 9, bringing reserves up to the 900 Bcf mark. At the same time, the EIA said that because of resubmission of data by one or more of its survey respondents, it was forced to revise upward the previous Thursday’s injection figure by 7 Bcf to 87 Bcf. On balance the market chose to focus on the bearish revision, resulting in lower futures prices late last week.

Looking ahead, the storage situation may not be as dire as once thought. Although noting that a repeat of last year’s injection profile would leave the market with a paltry season-ending stock of 2,377 Bcf, Citigroup analyst Kyle Cooper said that storage injections thus far this year have exceeded year-ago levels by approximately 15 Bcf/week on a temperature-adjusted basis. “Thus, if this situation continues and temperatures match last year, an additional 360 Bcf would be injected and that would lift total inventories to 2,737 Bcf,” he wrote in a note to customers Tuesday. Cooper looks for a 78-88 Bcf refill to be announced Thursday.

In daily technicals, support is seen at $6.00 and $5.95. A break of these levels, technicians hypothesis, could lead to tests of either $5.64 or $5.40. On the upside, resistance is seen first at Tuesday’s high of $6.09.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.