Physical natural gas for weekend and Monday delivery worked lower Friday as weather systems were confined mainly to load-killing rain and thunderstorms over much of the country and traders were reluctant to commit to three-day deals. Overall the market fell 5 cents to $2.19.

Futures were confined to a narrow range, and although talk circulates of sharply lower prices, traders are not yet convinced those are in the cards at least in the short run. At the close July was down 3.6 cents to $2.590 and August had declined 3.3 cents to $2.621. July crude oil jumped $1.13 to $59.13/bbl.

For the most part, traders aren't willing to commit to a scenario of significantly lower prices, at least not anytime soon. "A lot of guys I talk to, but don't believe, say we are looking at a $1 handle," said a New York floor trader. "That's what guys are saying, but I don't think you are going to see that; $2.50 seems to be holding well here. If you trade under $2.50 and hold that for a few days, then you might see some new selling coming in. It's not just a one-day deal. Traders will have to be convinced we're under $2.50 for the duration."

Others have a short-term bias higher, fueled by weather and coal plant retirements. "[Friday's production] level is estimated down by 0.3 Bcf/d to 71.6 Bcf/d, again subdued as maintenance continues to curtail flows," said's Andrea Paltrinieri. "With Leidy pipeline maintenance finishing on June 19, we will able to add 1 Bcf/d to today's production. Power burns continue to be relatively weak, but next week they are seen up as temperatures pick up coming back from the warm weekend.

"From the start of June, nearly 4.4GW of coal generation capacity will retire, but the impact on natty prices is difficult to evaluate. Going into the weekend and next week, weather forecasts need close watching to evaluate the potential for above-normal temperatures over the U.S. from the second half of June onward."

Analysts are united in their bearish stance with what they see as a structural shift taking place. "Although the market appeared to have some difficulty digesting [Thursday's] EIA [Energy Information Administration] report, we viewed the 132 Bcf injection as unequivocally bearish as it exceeded even our large expected build by 7 Bcf," said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients Thursday.

"Given a string of larger than anticipated builds, some structural shifts appear to be taking place that are reinforcing our expectations for additional declines to the $2.50 area. But as we noted this morning, we expect support through tomorrow's trade above the $2.54 mark and some additional possible consolidation early next week before another EIA release spurs more selling. On the upside, the market will have difficulty advancing much above the $2.70 level given the newly acquired surplus against the averages and the fact that today's build was the second largest of all time."

Others see not only ending storage north of 4 Tcf but also expect the oversupplied market to stick around for a while. "The 636 Bcf year-on-year storage surplus at winter exit has now expanded to 750 Bcf," said Breanne Dougherty, an analyst with Societe Generale in New York. "With 149 days remaining before the ever-important end-of-October signpost, and a base case trajectory towards 4.1 Tcf, we see a need for some sustained ledger tightening ahead in order to avoid potential containment-type pricing behavior at the denouement of the season.

"Bottom line is that the supply side of the ledger has seen more sustained growth than the demand side over the last year. This is what leaves the market in a state of structural oversupply for, in our opinion, at least two more seasons."

In the Rockies and West Coast, physical market prices slumped, but one area of strong demand proved to be the Pacific Northwest. "Some heat is moving in and that along with the low hydro is starting to impact the market," said an analyst with Energy GPS, a Portland, OR-based energy consulting firm. "On the gas side, I would expect to see higher power burns."

The anticipated heat for the moment is yet to be seen. Weekend and Monday gas at Malin fell 9 cents to $2.31, and deliveries to PG&E Citygates shed 3 cents to $2.91. At the SoCal Border gas was quoted at $2.36, down 13 cents, and gas at the SoCal Citygate shed a stout 14 cents to $2.50. Gas on El Paso S Mainline was seen 11 cents lower at $2.38.

More than adequate gas storage is likely to keep upward price pressure subdued. "PG&E [storage] is at 215 Bcf out of a total 250 Bcf capacity, and if you look at imports, total imports including PG&E and SoCal for June are down about 1/2 Bcf/d. You have gone from 5.2 Bcf/d last year down to 4.7 Bcf/d, so it looks like additional gas is not coming into the system and not from the Rockies," the analyst said.

Genscape is estimating that "current storage inventories as of June 1st across the PG&E system are 76% full...2014 levels stood much lower at 113 Bcf, while the 3-year average stands at 129 Bcf. As expected, storage activity has slowed its pace this year with May injections averaging 540 MMcf/d compared to May of 2014 where injections averaged 975 MMcf/d."

Other markets also softened. In the Midwest, gas for delivery to Alliance fell a dime to $2.45, and packages at the Chicago Citygate shed 8 cents to $2.46. At Demarcation weekend and Monday packages dropped 7 cents to $2.38, and gas on Consumers was quoted 4 cents lower at $2.64. Gas on Michcon fell 2 cents to $2.64.