June Fizzles After Fast Start
After spiking as much as 7 cents higher in the Wednesday evening
Access session, the new prompt month was the focus of much
conjecture and speculation. Would June continue higher, following
the example set by May, or fall from its already lofty perch? For
many, it is still too early to tell, but if yesterday's price
action was any indication, June will have a difficult time matching
May's 50-cent price increase over the past month. After opening at
$2.40, the June contract tumbled throughout the session to close at
$2.339, a 0.2-cent decline from Wednesday's close.
While May's tenure as prompt month was marked by a bullish
combination of both fundamental and technical factors, June has
only been affected by the fundamentals factors of storage and cash
prices. Cash prices for both April and May continued higher
Thursday, with Henry Hub quotes pushing into the mid- to
upper-$2.30s. Meanwhile, a smaller than expected storage report
released last night added to the bullish sentiment.
However, Tom Saal of Miami-based Pioneer Futures remains
unconvinced that higher prices are in the future. "Massive
short-covering, mostly by commercial traders, was responsible for
our rally to $2.40. That is effectively limiting the number of
buyers available if the market continues downward. He looks for
prices to trend back into the $2.20s until the market can latch
onto something more substantial.
Isn't the low storage injection substantial? Not yet, argues
Saal. "An injection season is not decided by one week's storage
figure." He continued, noting that below-normal temperatures in
storage sensitive regions of the country last week probably
curtailed storage injections. "Now we know what will happen when
there is some demand in the market, I want to see what will happen
when there is no demand in the market."
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