The entire energy complex took its foot off the accelerator on Tuesday following the significant gains racked up in Monday’s session. September natural gas futures ended up dropping three pennies to $4.001, while September crude futures backed off 16 cents to $71.42/bbl.

Following Monday’s rally, traders and analysts alike were making comparisons to the late April-early May rally that saw front-month futures jump from $3.155 to $4.575 over the course of 12 days. While that rally — along with a few more since — have failed to find follow-through buying, traders continue to look for the the move that will finally succeed.

“Following its jump higher Monday, the market appeared to settle down a little bit on Tuesday,” said Gene McGillian, a broker at Tradition Energy. “Without the other side of the energy complex really turning back south, I think natural gas futures will continue to be propped up. The fundamentals in the gas market have not changed, but everyone is focused on later this year. Demand levels will start to climb back up again, so prices will surely follow.”

McGillian said the key to the recent rally is whether it is for real this time around. “We saw this pattern develop two-and-a-half months ago and the market ended up having to retreat because it was premature,” he told NGI. “Only time will tell whether or not this move is for real, or whether it is another premature loading of the gun. We’ve been pointing out to our clients that the $3.200 to $4.500 area is the market’s current boundaries. The thing you have to remember is as we get toward the end of the year, prices historically climb, so prices will likely head higher as well. Without further gains in the oil and equity markets or any real tangible growth in energy demand, I think we have a couple more months of seesaw trading.

“Because the fundamentals are currently unsupportive, I think the rallies that are coming along are unstable at best. If they turn and you’re positioned at the wrong point, you’re subject to a lot of pain.”

Analysts see a lot of work ahead for the bullish camp. “The bulls have to launch an attack on resistance overhead, with the ultimate objective of breaking over this year’s major resistance at $4.690,” said Peter Beutel, president of Cameron Hanover, a Connecticut-based energy consulting firm. He pointed out that “The high for 2009 is $6.240/MMBtu, but that was reached as prices were declining, on their way towards $3.155. The psychology has changed and is still changing. Four weeks ago inventory surpluses were the undisputed primary factors in this market. Now, while they remain important, the recovering economy, higher oil prices and low rig counts are coming into their own as factors likely to elicit a trading response.”

Traders looking at the economy to gain insight into the direction of natural gas prices were disappointed with the 8:30 a.m. EDT Tuesday release of June personal income and consumer spending figures by the Commerce Department. Expectations were for a decline in personal income of 1.1% from May’s stout 1.4% gain. The actual figure came in at minus 1.3%. Consumer spending rose 0.4%, just ahead of expectations of 0.3% and May’s rise of 0.3%.

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