In a session notably void of fresh fundamental or technical news, natural gas futures moved sideways yesterday as many traders opted to wait until the beginning of the three-day settlement period and the release of storage figures today before placing their orders. At $2.97 the August contract finished 0.8 cents lower on the day and just about in the middle of its 3-day $2.915-$3.01, trading range. Volume was relatively weak with just 61,764 contracts changing hands.

Bulls and bears each had positives on which to hang their hats yesterday. For bulls, it was continued hot temperatures across much of the country and the associated demand in the physical market. Bears on the other hand, were quick to point to the likelihood Wednesday of yet another in a string of price negative storage reports. On balance, most traders surveyed by NGI yesterday put more stock in storage being the market mover, just as it has been since the injection season began 15 weeks ago.

All told the market has declined an average of 14 cents on Wednesdays (Thursday in the case of the 4th of July Holiday) in 13 of those 15 weeks for a total loss of more than $1.80.

Looking ahead, expectations are centered on a net injection of 80-100 Bcf Wednesday, which is dead center between the 110 Bcf seen the last two weeks, and the 70 Bcf figure from a year ago. Tim Evans of New York-based Pegasus favors the higher end of the 80-100 Bcf range for this week and is already looking toward a 80-95 Bcf injection to be released next week. “The seasonal trend toward smaller builds in storage might seem hopeful, but the comparisons with last year’s injections of 54 and then 63 Bcf would remain bearish as the market would amass a growing year-on-year surplus.”

For Evans, the bulls’ only hope is that fundamentals can firm enough, even temporarily, to drive off some of the short interest accumulated over the past few months. “Will the market stage an upward correction at some point, or simply grind lower?” The standard for answering that question may be to which direction the market finally breaks out of its recent trading range. The market has sunk lower in five out of six expirations, including the last three. Will August buck the trend? To hedge for this uncertainty, Evans is keeping a tight buy stop on his short position, basis August. Meanwhile, he is looking for a little bounce in September that would encourage him to try the long side of the market.

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