After scouting both lower and higher prices on Monday, natural gas futures traders appeared content to relax on Tuesday as the May contract traded a tight range before closing at $3.689, up 6.1 cents on the day.
The prompt-month contract -- which traded within an 11.5-cent range between $3.591 and $3.706 during the regular session -- pushed higher as the day went on before backing off at the close.
"Natural gas was pretty quiet out there on Tuesday as opposed to crude, which was back and forth all day long," said a Washington, DC-based broker. "At least natural gas futures had a little bit of a trend to it. Energy commodities continue to get lumped in with the larger economic picture of the country. There are giant amounts of uncertainty out there. On a day like Tuesday gas traders had their hands in their pockets. No one is ready to say that the scary economic free-fall is coming to an end and that we will start needing natural gas as a fuel source for the recovery.
"There are some really big unknowns out there right now that include the impact of the rig reductions, the economic recovery and the possibility of being swamped by the world's [liquefied natural gas] imports this summer. These are things we'll have to wait and see how they play out." Looking at the near term, the broker said he expects prices to continue their slow grind lower. "I tend to think if we had a big sell-off, we would rebound...and if we had a pop higher, it would probably get beat back down," he said.
Even the lingering cold is unable to help the bulls here. "We have had a cooler start to spring and are even racking up a few heating degree days here and there, but I don't think it is going to be enough to make any difference in terms of inventories," the broker said.
Warmer weather appears en route to the East later this week, according to John Kocet, a meteorologist with AccuWeather.com. "It's about time! A big high-pressure system is going to park itself over the East Thursday and Friday," Kocet said. "It will provide a spell of exceptionally nice weather featuring plenty of sunshine and rising temperatures. The ideal outdoor conditions will encompass a broad area from the Midwest to New England and southward to the Carolinas."
Out West, the meteorologist said blustery winds on Tuesday would be ushering in colder temps. "In California and Nevada, the leading rush of chilly air will be accompanied by strong, gusty winds. On the ridges, winds will gust to 65 mph," he said.
Others believe the market may be ready for a little bit of a bounce. "I think if there were a good economic report or a good move by the stock market, it would spur more short-covering. I am waiting for the market to go to $4.25 at some point over the next week and a half. But every day the market seems to come in 10 cents lower," said a New York floor trader.
Favorable economic news may have to wait as figures released Tuesday morning by the Commerce and Labor departments were below expectations. The Commerce Department reported that March retail sales fell 1.1%, well below expectations of a 0.3% gain and well below February's 0.1% decline. According to the Labor Department, March producer prices dropped 1.2%, but traders were looking for prices to come in unchanged. Producer prices in February had registered a 0.1% gain. The retail sales figures were considered especially disappointing, but the producer price data is often quite volatile, traders noted.
"I think traders are waiting in the weeds to sell this market if it gets above $4. They are looking for an excuse to sell the market rather than establish a long position," the floor trader said.
Others also favor the short side. "We are maintaining a bearish posture as we would continue to suggest working this market strictly from the short side. For now, we will await price rallies per June futures to reestablish shorts," said Jim Ritterbusch of Ritterbusch and Associates.
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