June natural gas futures traded in an extremely tight 12-cent range Wednesday, further highlighting the market's recent directionless pattern. Trading between $7.610 to $7.730, the prompt month ended up closing 8.3 cents higher at $7.720, breaking the week's two-day string of lower closes.

"It looks like we are continuing with the recent fun and games. Wednesday's action was pretty quiet with no real headlines to the trading," said Steve Blair, a broker with Rafferty Technical Research in New York. "We are basically playing between the support and resistance. We made that most recent assault on $8 and some of the bulls were looking to finally run through it. They tried by notching a high of $8.105 last Friday, but it ended up failing miserably, so it looks like we are back where we started.

"There is really no reason to be trading with an $8 handle here because there is plenty of gas in storage and temperatures over the eastern third of the country are nice with no real cooling demand. This market does not have a reason to move."

Some traders hint that those looking for a significant price breakout may have another month to wait. "This market continues to provide a fair amount of frustration to both the bulls and the bears as price follow-through in either direction remains elusive," said Jim Ritterbusch of Ritterbusch and Associates. He said the current price consolidation is likely to continue at least through the balance of this month until summer temperature forecasts and the hurricane outlook come into clearer focus by early June.

To some, the hurricane outlook seems clear already. According to AccuWeather.com meteorologist, Joe Bastardi and his team a much more active hurricane season is in store this season with "significantly more storms striking the U.S.," the forecaster said Tuesday (see Daily GPI, May 9).

"All factors considered, we still look for a slow grind downward during the coming sessions and would suggest accepting profits on any short June positions within the $7.50-7.55 zone," said Ritterbusch.

Touching on the early storm activity forming in the Atlantic, Blair said Subtropical Storm Andrea off the coast of South Carolina and Georgia really shouldn't affect the market. "I think it is a nonevent based on its course," the broker said. "There was a small reaction as the market took notice, but it is not headed towards the Gulf of Mexico anyway."

Weather bulls may be able to play the hurricane card, but supply bears point to increasing gas in storage. Turning attention to Thursday's Energy Information Administration (EIA) storage report for the week ended May 4, Blair said he has been hearing projections of an injection of 85 to 95 Bcf. "Definitely not a huge injection, nothing really major," he said. "Now if we saw a healthy triple-digit injection, this market would likely head back down. It will probably shoot for the $7.50s."

A Reuters survey of 23 estimates found that storage levels were expected to rise by approximately 98 Bcf for the week, while the ICAP storage options auction Wednesday afternoon produced a 98 Bcf injection consensus.

Golden, CO-based Bentek Energy's Flow Model indicated an injection of 99 Bcf, bringing stocks -11.5% below the five-year high (last year) and 20.8% above the five-year average.

For the week, the company said storage fill nationwide increased from 42.1% to 45.2%, with small changes in inventories. "The largest increase was at Egan again this week, up 8.6% from 70.5% to 79.0%," Bentek said. "The largest decrease was at Latigo-CIG, down 2.1% from 42.0% to 39.8%."

The number revealed Thursday morning will be compared to last year's 81 Bcf build and the five-year average injection of 65 Bcf.

©Copyright 2007 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.