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Bulls vs. Bears; Call it a Tie Wednesday

Bulls vs. Bears; Call it a Tie Wednesday

After rallying more than 15 cent from last weeks lows, natural gas futures took a breather Wednesday, trading sideways within a tight 4.5-cent range. The June contract settled unchanged for the day at $2.359.

The lack of upward momentum by the futures market gave nearby cash prices an opportunity to play catch-up yesterday, several traders noted. NGI's Henry Hub average for today of $2.36 is nearly a spot match with the June close and just a penny more than first-of-month index. A Gulf Coast trader feels that because cash prices have moved up to match the futures, the ball once again rests in the futures traders' court. "Ultimately it will all come down to what the funds decide to do. Weather is benign, and until that changes the market will continue to look to Nymex for direction," he said.

Even though it will likely be weeks before the market can latch onto weather reports for price direction, the market was not completely without news yesterday. Released too late to affect trading Wednesday, the American Gas Association reported 34 Bcf of gas was injected into storage last week. That build, while falling in line with industry expectations focused on a 20-40 Bcf refill, paled in comparison with the 78 Bcf tally of a year ago. Total gas in underground storage facilities now stands at 1,408 Bcf, which is 131 Bcf more than the same time last year.

Tim Evans of New York-based Pegasus Econometric Group said from a purely economic perspective the storage report is undeniably bullish. However, he admits it depends how much of the low injection figure was already factored into prices. Looking ahead, Evans thinks the market could initially trend lower in an apparent repeat of last week's meltdown. However, he feels that "head fake" lower will only lead to fresh buying interest, which ultimately will propel the market past the $2.40 level by early next week.

Last night, the first part of his prognostication looked to be right because the June contract was already 2.7 cents lower in the after-hours Access trading session.

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