After initially ducking lower to equal Monday’s $5.16 low, the June natural gas futures contract struggled higher in featureless trading on its first session as prompt contract Tuesday. It closed at $5.236, up 4.6 cents for the session and 7.6 cents off its early low. Estimated volume was light, with 69,391 contracts changing hands.

Despite a 70-cent erosion off last week’s highs, the market still has downward potential, traders agree, and that kept most buyers on the sidelines. Those that were out in the market Tuesday found they had to chase prices higher, however, as sellers appeared to take a wait-and-see approach. To compound the problem, cash market prices provided little direction as they tumbled lower in sympathy with Monday afternoon losses in the futures market. NGI’s Henry Hub averaged $5.11, down 17 cents for the session.

Looking ahead, traders are banking on the market receiving a jump start from fresh supply data to be released by the Energy Information Administration Thursday morning. After a series of bullish reports through much of March and into the first part of April, the market received its first price-negative news last Thursday when the EIA said that a whopping 61 Bcf was stored in the ground during the week ending April 18.

And while it appears unlikely that the market was able to repeat that hefty refill, expectations for last week are not too shabby in calling for an injection in the 40-50 Bcf range. For the comparable week last year the market built 31 Bcf into stocks and the five year average is calculated at 47 Bcf. And though the week-to-week change may appear to favor the bears, the larger supply picture is still undeniably bullish. At 684 Bcf, storage is a crushing 891 Bcf less than year-ago levels and 573 Bcf less than the five-year average.

With mixed signals coming from both the cash market and the supply picture, futures traders have been forced to rely on technical features of late. Most chartists were in agreement that prices were in store for a sizeable drop last week after a weak performance Monday, April 21 (see Daily GPI, April 22). However, the answer is not so clear cut now, traders agree. “To be convinced the decline is complete, we’ll have to see gas close above the Gann resistance line declining from the April 21 high,” wrote Craig Coberly of Atlanta-based GSC Energy in a note to customers Tuesday. For Wednesday’s session, this would mean a close above the $5.41 level. Because the line slopes downward at the rate of 8 cents a day, it is seen in the $5.33 area on Thursday.

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