July gas futures Tuesday retreated back down to the levels reached prior to the arrival of Tropical Storm Alberto, slipping 6.1 cents to $6.163 in a quiet day of trading. The near-month contract opened the regular trading session higher at $6.27 and reached a daily high of $6.310 in the morning before sliding back down and ending the day near its daily low of $6.140.

“It’s been very slow and quiet today. I think everybody is basically in wait-and-see mode,” said ICAP Energy broker Brad Florer. “Everyone is waiting to see if some real summer heat shows up. Hurricane hype is bound to start sooner or later now that we’ve had our first storm. But there are differing factors that are basically just keeping people out of the game right now.

“Even though the chart is weak and storage is high, no one wants to take a shot down at this level and keep selling,” he said. “And we haven’t had a decent rally in quite a while so no one wants to be the first guy jumping in to pick the bottom. We just continue to move sideways.”

It probably will take a supply disruption or an abnormal storage report to trigger the next move outside the recent $5.94-6.82 trading range, he said. “But I think every day that goes on, you are going to see bulls become more bold, and the guys that are short will face more pressure to cover.”

Jay Levine of energyjay LLC said he sees the next level of near-month gas futures support at $6.05 or $6.00, followed by $5.80 or $5.75. In the event of a rally, he predicts that gas futures could hit resistance at $6.60 and then $7. “May sound like a tall order now, but even with more storage than the market knows what to do with, I suspect there’s a certain pent-up frustration, perhaps not unlike a rubber band being wound up too tightly, that will extend one of these rallies beyond just a simple bounce.”

However, with crude falling sharply and gas storage levels continuing to rise, that pent-up frustration may have to be moved to the back burner. Natural gas should be feeling some downward pressure from crude, which tumbled more than a dollar for the second straight day on Tuesday. Light sweet crude for July delivery fell $1.80 to $68.56/bbl. Tuesday’s decline followed a $1.27/bbl drop on Monday. The last time front-month Nymex oil futures settled below $70 was May 24. Crude has been range bound between $68.17 and $76.40/bbl since April 16.

Early predictions for this week’s gas storage report are ranging between an 85 and 95 Bcf injection. Ron Denhardt of Strategic Energy and Economic Research said Tuesday that he’s predicting a 92 Bcf injection, which would look pretty bearish compared to the 73 Bcf injection during the same week last year, and the 77 Bcf injection reported last week. The five-year average is 92 Bcf.

“During the last four weeks, weather adjusted working gas storage injections were 1-1.5 Bcf/d below last year,” Denhardt said. “There is evidence that the supply-demand balance is tightening. There has been some recovery in the industrial sector. Still even with last year’s hot summer and a 1.5 Bcf/d tighter supply-demand balance than last year, working gas storage will end October at 3,731 Bcf. This number is likely to be reduced by hurricanes but a normal summer could add 150 to 200 Bcf more injections.”

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