While most industry players had been expecting a fairly quiet expiration for the July natural gas futures contract, bears kept the pressure on in trading Wednesday. After hitting a low of $5.810 late in the session, July natural gas ended up going off of the board at $5.887, down 22 cents on the day.

The $5.887 close was the lowest settle of a prompt month in 17 months. To find a lower front-month close you would have to look all of the way back to Jan. 5, 2005, when the February 2005 contract closed at $5.833.

Taking over as prompt month in Wednesday's overnight Access session, the August contract ended Wednesday's regular trading session at $6.160, down 15.2 cents on the day.

"July natural gas tried to hold up a little bit north of $6 earlier in the session, but it failed," said a Washington, DC-based broker. "We then had a long steady grind lower after that. We only had a 10-15 cent range in the close, so it wasn't all that crazy, but clearly breaking below $6.10 and getting down below that $5.95 level was definitely a sign of weakness."

Looking at the newly crowned prompt month, the broker said August futures were similarly weak. "We went from $6.30 down to $6.10, so there wasn't really any positive action there. It's not that inspiring in terms of being able to hold on to these price levels. It looks like continued weakness. Once again, the question is whether or not the $6.00 to $5.95 level can hold for August now. That $5.95 number is still a number to look at."

The broker added that storage levels are going to have a lot to do with the proper answer to that question. "Looking at last year, in May we were 22% above the five-year average, but then we had a very hot early start to the summer and whittled storage down to only 5% over the five-year average. We have clearly not done that this year with the mild or equal to expectations summer. You have to remember, we still do have big chunks left of summer and the hurricane season. There are still a lot of potential threats out there." In the storage report for the week ended June 16, supplies were 35% over the five-year average.

Looking at futures prices, he noted there appears not to be a whole lot of downside, which stands in contrast to a significant upside if hurricanes develop or an extended period of hot weather moves in. "That is why I don't think we are seeing a tremendously aggressive shorting or bearish reaction off of the storage surplus. That can obviously change later down the road in late summer as threats of heat and storms dissipate."

Market technicians are not convinced that a market bottom has been put in. "A day without a new low is hardly sufficient grounds to proclaim a bottom," said Walter Zimmerman of United Energy, on Wednesday morning. He believes that the bulls have to prove their case with a move above $6.285, and following that, a move above $6.385. Also the bulls need "a decisive close above this $6.385 level on Friday" in order to make the argument that technical conditions are in place to form a market bottom. "In wave count terms the bulls have no more cushion. It is rally or else time," he said.

Others see hints of an end to falling futures. "It looks like the market might be bottoming out. The funds are a bit short in the August contract," said a New York floor trader Wednesday. He suggested that the August contract could rally to $6.50 once it becomes the spot month. "There might be a week or two where it trades from $6 to $6.75," he said.

Meteorologists in at least one major energy market hint that the cool June may transition into a cool summer. "To date, June 2006 has only two days of 90s [in Chicago] -- half the normal number. With no additional 90s likely before the month closes, this June is likely to join only 22 others since 1928 to produce so few 90s at Midway Airport," said Tom Skilling, meteorologist with WGN-TV in Chicago. He said the summers that have followed similar Junes have trended modestly cooler than normal, with the final June-August average finishing about 0.5 degrees below normal and the city's annual 90 degrees tally closer to 18 than the "normal" 21.

Looking at Thursday morning's storage report for the week ended June 23, a number of industry experts arrived at the exact same injection number -- a build of 59 Bcf. The Washington, DC-based broker, the ICAP derivatives auction and Golden, CO-based Bentek Energy all had that number penciled in.

Bentek said a 59 Bcf injection would result in 2,535 Bcf of gas in storage, which would be 31.2% above the five-year average working gas level and 12.8% above the five-year high. "It is apparent that the rate of storage injection has slowed significantly," the company said. "Only five weeks ago, stocks were 20.4% over the five-year high." For the report, Bentek expects a 39 Bcf injection in the East region, an 11 Bcf build in the Producing region and 9 Bcf deposited in the West region.

Not all of the forecasts were exactly aligned, however, as a Reuters survey of 20 industry players was looking for an average injection of 64 Bcf.

Thursday morning's storage number will be compared to some pretty significant historical injections. The EIA said 95 Bcf was injected into underground stores a year ago, and the five-year average injection is 98 Bcf.

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