Natural gas for delivery Thursday on average was unchanged at $2.56 in Wednesday's trading. Most points moved within a penny or two of unchanged, and the Gulf, Midwest, Midcontinent, Rockies and California on average were nearly unchanged, while the East showed the greatest declines, with Marcellus points coming in with losses.

Futures traders bided their time ahead of the weekly Energy Information Administration (EIA) report and at the close, June had drifted lower by 0.4 cent to $2.776, and July had fallen 0.8 cent to $2.828. June crude oil managed a gain of 53 cents to $60.93/bbl.

"The market went up 25 cents on a supportive EIA number last week and power burns are up year/year so fundamentally you are at the top of the price band," said Energy GPS principal Jeff Richter. Energy GPS is an Oregon-based consulting and risk management firm. "$2.80 to $2.85 is the top of the band so now the question is, what are the power burns going to do the rest of the way out?"

He noted "production did dip down only because of maintenance, 0.5 Bcf here, 0.5 Bcf there, but people were saying it’s shut off because of price. No. That should come back on. Fast forward into June, and you should have a power grid using a bunch of gas. Crude is going up, so you have the offtake from there.

"The EIA number [on] Thursday is the question. The EIA hasn't shown two bullish numbers in a row. I've pondered this for the last couple of days; it does make sense to stay within this band, and there is no mind altering information out there. If you put a gun to my head, I am bearish natural gas longer term."

Richter noted that power burns go up seasonally, "but it's just a question of the power burns outpacing the production, and the answer is no. Coal is getting retired, but production is pretty stout."

Production will be a little less stout as Chesapeake Energy Corp. has increased its shut-ins in the Marcellus Shale. Early this year management had said it would curtail 250 MMcf/d gross from the Marcellus through this year on weak in-basin gas pricing (see Shale Daily,Feb. 25). Curtailments now have reached about 500 MMcf/d gross, Senior Vice President Chris Doyle said Wednesday. He revealed the shut-ins during a first quarter conference call. Chesapeake also has reduced activity in the Marcellus to one drilling rig and one hydraulic fracturing crew. "We plan to maintain production at that reduced activity, but we stand ready to respond to what the market tells us, regardless of production impacts."

"The last two days prices haven't gone up, so I think we have gotten the short covering out of there," said Richter. Cash at Henry Hub “is 3 cents below prompt so there is no signal that prices will keep going up. You are at the top of the band and could easily drift down 10 cents pretty easily, and if the EIA number comes out bearish, then you are at the $2.55-2.60 level.

"At $2.75 you have 25 cents upside potential to $3 and 50 cents downside to $2.25. At $2.50, you have 50 cents upside and 25 cents downside."

The actual EIA figure relative to expectations will likely test which side of the band is tested. Last year 75 Bcf was injected and the five-year pace stands at 68 Bcf. IAF Advisors is looking for a build of 75 Bcf, and ICAP Energy calculates an increase of 76 Bcf. Citi Futures Perspective analysts see an injection of 70 Bcf.

The recent five-day futures advance has had some market technicians thinking that the bears had lost control of the market, as June futures traded as high as $2.824 Monday after settling at $2.606 just a week ago following the expiration of the May contract. The bears may have temporarily lost control of the market, but the bulls still have a lot of work to do to make their case for a seasonal cycle low or a major market bottom.

"Bulls have had a good run over the past six days,” said Brian LaRose, market technician at United ICAP. “However, they are still far from confirming a cycle low is in place or that a major long term bottom is developing.

“To do that bulls still need to lift natgas above $2.939 (.236 of 4.544-2.443) and $3.039 (.236 of 6.493-2.443). "[We] have no reason to view this advance as anything more than a short term recovery until these levels can be breached," he said Tuesday.

Gas buyers, faced with the job of purchasing incremental volumes for MISO power generation, face an active weather system across the grid with accompanying large amounts of wind generation.

"A complex and slow moving frontal system is expected to slide across the central US as the week progresses with rounds of rain and thunderstorms. Storms may be strong," said forecaster WSI Corp.

"A southerly flow ahead of the system will promote warm and somewhat humid conditions, but cooler, more seasonable air may begin to pour into the northern tier by Friday. A secondary storm system is expected to spin into the central US during the weekend with another round of rain and thunderstorms, which may be strong. Rainfall totals may range one to two inches or more. A north-northeast flow around this system will support cool temperatures across northern areas with highs in the 50s and 60s, but southern areas may remain warm with highs in the 70s and 80s.

"A southerly breeze will support strong wind generation during the next couple of days. Output may peak in excess of 9 GW. Wind generation may subside from this peak during Friday into Saturday. However, the secondary storm system may cause wind gen to increase during Saturday night into Sunday."

Tim Evans of Citi Futures Perspective said the consensus view for EIA’s storage report on Thursday "is still forming, but estimates we've seen so far suggest it’s currently running in the 73-77 Bcf range of net injections, very close to the 75 Bcf date-adjusted build from a year ago and just marginally above the 67 Bcf five-year average for the date."

Tom Saal, senior vice president at FC Stone Latin America LLC, in his work with Market Profile anticipated the market will test Tuesday's value area at $2.779-2.803. From there methodology requires following a market break either higher or lower. Should June break above the Initial Balance at $2.824, trading targets of $2.861-2.897 would represent profit objectives. If June were to break below the Initial Balance at $2.751, then lower objectives of $2.715 and $2.678 would be in play.

In physical trading price points, the Marcellus showed some of Wednesday’s biggest moves.  Gas on Millennium was quoted 5 cents lower at $1.49, and gas on Transco Leidy fell 7 cents also to $1.48. Parcels on Tennessee Zone 4 Marcellus shed 14 cents to $1.31, but on Dominion South next-day gas was quoted at $1.73, up 9 cents.

Gas headed to New York City on Transco Zone 6 fell a penny to $2.80, but next-day gas on Tetco M-3 rose 15 cents to $1.94.

Prices at major hubs moved little. Gas at the Chicago Citygate for Thursday delivery was seen at $2.74, unchanged, and gas at the Henry Hub came in a penny lower at $2.75. Gas at Opal fell a penny to $2.52, and parcels at the PG&E Citygate changed hands 2 cents lower at $3.13.