After battling higher on Monday and then forcing the market lower on Tuesday, the July natural gas futures contract and the people who trade it decided to make Wednesday a draw. The contract traded between $8 and $8.155 before settling the day smack dab in the middle at $8.080, up 1.6 cents from Tuesday.

With July natural gas futures still hovering just above $8 after Monday's impressive rally fizzled on Tuesday, traders were left to wonder who really is in control of the market's direction at this point. After closing at $8.191 on Monday, the July contract dropped 12.7 cents to settle at $8.064 on Tuesday. Following Wednesday's trading activity, the jury is still out as to who is calling the shots.

With summer heat rapidly approaching and the Atlantic hurricane season already begun, traders understand that while current storage levels are fairly robust, anything can happen at this time of year to change that. The 2,053 Bcf in underground storage as of May 25 is 355 Bcf above the five-year average of 1,698 Bcf, but 179 Bcf less than the 2,232 Bcf level recorded during the same time last year.

While an injection north of 100 Bcf is expected to be revealed Thursday morning for the week ended June 1, the industry is now aware that withdrawals are a possibility during the traditional summer injection season. Last year acted as proof. For the weeks ended July 21, 2006 and Aug. 4, 2006, 7 Bcf and 12 Bcf were withdrawn from underground storage due to heat. The five-year averages for those weeks at the time were injections of 65 Bcf and 61 Bcf, respectively. (see Daily GPI, June 6).

"It's not simply fear regarding supply and (fear) premiums helping keep energy prices as high as they are, but the fear of missing out on a significant move in the event fears turn into reality," said Jay Levine, a broker with enerjay LLC in Portland, ME.

In the time being, he added, the risk is still firmly for an upside price move. "There's the risk that you could be left out of a significant move -- the principal reason, IMO, natural gas has been so resilient for so long now -- with the alternative being you'll be the last man (long) standing when the music stops and the bottom falls out," Levine said. "Will the last long out please shut the door? Truth is at some point -- at some point -- the music will stop and the market will have peaked (a top made) just as surely as at some point, there's a bottom -- a discussion we were having not that very long ago when the complex was on the ropes -- the bottom line being in between the tops and bottoms are the 'middles.'

"My very basic guess is we're now somewhere in that 'middle' (and that includes the near-term chart pattern, even if the bias in NG appears to be leaning up) since I don't believe the downside is that great. And while I do believe that the risk/reward still points up -- especially since I remain, overall, an energy bull -- the complex may also very well slog around for the foreseeable future (read...range-bound)," he said.

Taking a closer look at the Energy Information Administration's storage report Thursday morning, market bears could receive a little bit of short-term help from a large number. A Reuters survey of 22 industry players is calling for an average build of 106 Bcf. An injection of that size would be well above last year's 77 Bcf injection and just above the five-year average build of 99 Bcf.

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