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June Fizzles After Fast Start

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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