Trading within a fairly thin range on Tuesday, July natural gas futures notched a high of $7.580 and a low of $7.435 before settling at $7.474, down 19.6 cents for the day. Natural gas futures appeared to be loosely following crude’s action during the session, where the petroleum contract seemed to dip, recover, then dip again.

On its expiration day, July crude once again made a run at cracking the psychological $60/bbl level. The contract reached a new high of $59.70, before falling off to expire at $58.90, down 47 cents. August crude reached $59.95, before settling at $59.04, down 84 cents for Tuesday.

“We held that $7.43 level pretty well again in natural gas…so I don’t think this is going to be a bigger break unless something comes out of the blue here,” a Washington, DC-based broker said. “It looks like we took a breather Tuesday and are getting ready for the oil and natural gas inventory reports on Wednesday and Thursday.”

As for crude, the broker said there is expected to be a draw of 1.6 million barrels when the report comes out Wednesday, which would likely be taken bullishly. As for the Energy Information Administration’s (EIA) natural gas storage report on Thursday, he said it still looks like there will be a “bullish” injection.

“So, if we get the storage numbers that we are expecting, the bulls can kick it back into gear,” he added. For natural gas, the broker said he expects an injection of 70-75 Bcf.

Looking back at trade from Monday, one trader pointed out that the settlements of the crude oil and natural gas contracts may have been deceptive. Although July crude oil continued its rocket-like advance on Monday to close at $59.37/bbl, the July natural gas contract eased $0.02 to $7.670. Those who suggest that the two have decoupled might be premature. “Crude oil is keeping the natural gas firm,” said a New York floor trader. He pointed out that July natural gas fell as low as $7.50 in Monday’s trading, but “crude rallied 70 cents and that is what pulled natural gas upwards at the close.”

The strength in petroleum markets notwithstanding, the current advance in natural gas may have run its course in the short run. “I think if prices rally back up to the $7.80s, that would be a great selling opportunity,” the trader said. “We should be 40 cents lower by the end of the week.”

The weather bulls may have difficulty deciphering the National Weather Service (NWS) forecast for this week. For key energy markets in the Mid-Atlantic and industrialized Midwest the NWS is predicting a mixed picture relative to the accumulation of cooling degree days (CDD). For the populous states of New York, New Jersey, and Pennsylvania for the week ending June 25, the NWS predicts a total of 31 CDD or four less than normal. The heartland states of Ohio, Indiana, Michigan, Illinois, and Wisconsin are expected to see 51 CDD or 10 above normal.

Warmer than normal temperatures for the week ending June 10 were credited with causing a lower than anticipated injection of working gas into industry inventories. An injection of 73 Bcf was reported last Thursday for the week ended June 10, but expectations were for additions of 85 Bcf. The July futures gained a healthy 17.2 cents following the release of the report. The weather bulls hope that further weather related gains may be possible because the CDD tally is currently running ahead of schedule, and that trend may continue to whittle away abundant levels of gas storage, which currently stand 216 Bcf above last year and 294 Bcf greater than the five-year average. To date, CDDs for New York, New Jersey, and Pennsylvania stand at 125 or 49 greater than normal. For the Midwest states above, 137 CDD have been tabulated or 12 above normal.

Looking ahead to the natural gas storage report Thursday, Citigroup’s Kyle Cooper is calling for a build between 70 and 80 Bcf for the week ended June 17. “Our confidence is very low as the various models are all over the board,” he said. “However, the final consensus is for a build slightly higher than last week.”

Expecting something a little higher, IFR Energy Services’ Tim Evans is looking for the storage report to reveal a build between 85 to 95 Bcf. The number reported by the EIA Thursday morning at 10:30 a.m. EDT will be compared to last year’s 86 Bcf build and a five-year average injection of 92 Bcf.

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