June natural gas is set to open 2 cents higher Friday morning at $4.38 as traders see bears unwilling to add additional short positions before the extended holiday weekend. Overnight oil markets rose.

This has been a tough market to trade with market swings in both directions highlighting the intensity of the bullish and bearish case. Analysts saw that dynamic in play Thursday with the June contract scoring a double-digit loss on an inventory report that was just a few Bcf over industry consensus. “This sizable price reaction to a storage figure barely removed from street ideas underscores a lot of pushing and pulling that has been taking place in this market all month,” said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday to clients.

“The bears remain adamant in an opinion that production will come to the rescue in this market in the coming months in accelerating enough into record territory to erase the bulk of the current supply deficit. The bulls, on the other hand, still see storage some 43% below five-year average levels and continue to see a market capable of spiking viciously to the upside on first indication of sustainable hot temperatures or even minor supply disruptions.”

Overall, Ritterbusch is looking higher. “Rather than attempting to anticipate every 3-4% price swing, we have laid out a trading theme in which prices will eventually rotate higher and possibly approach the $5 mark depending upon early summer weather events,” he said. “At the same time, we have advised selectivity in approaching the market strictly on price pullbacks and we have suggested the $4.40-4.45 zone as appealing in this regard. We would suggest holding any long positions within the summer portion of the curve while advising stop protection below $4.29 on a close-only basis using the nearby contract as a reference. We don’t expect much downside price follow-through [Friday] as existing shorts will likely be more interested in accepting profits ahead of a long weekend rather than adding to bearish holdings.”

Near-term weather forecasts call for a tricky blend of thunderstorm activity and seasonal temperate trends. WSI Corp. in its six- to 10-day outlook said, “[Friday’s] forecast is cooler than yesterday’s in the East while warmer in the North Central and Northwest. Forecast confidence is near to a bit lower than average today with considerable technical differences between the models.

“Max temps next week are highly contingent upon shower/thunderstorm activity, which will be widespread across the Midwest and Southeast. Depending on where/when these complexes set up, temps can easily fluctuate by 5-10 degrees for any given region.”

In Arizona and Nevada, thunderstorms aren’t expected to be an issue and in the physical market peaking units may get a workout this extended weekend in the desert Southwest by Monday. The Weather Channel forecasts the hot spots in the nation to be Phoenix and Las Vegas at 103. The normal high in Phoenix is 97 and Las Vegas is usually as high as 91 this time of year.

In overnight Globex trading July crude oil added 30 cents to $104.04/bbl and July RBOB gasoline gained a half cent to $2.9937/gal.