In what might have been the most bearish 0.4-cent increase in recent memory, natural gas futures inched higher Monday in a session marked by technical wrangling. Selling was seen at the open and again in the afternoon by funds and local traders. Most of the morning meanwhile, was the domain of bulls as short-covering lifted the market just shy of Thursday’s $5.83 high. The May contract finished at $5.713, up .04-cents for the session, but more than a dime off its $5.82 high for the day.

With weather forecasts calling for normal and above-normal temperatures for the next week to ten days and with storage data likely to show a moderate sized injection this Thursday, natural gas market watchers have decidedly fewer bullish arrows in their quiver this week. According to Salomon Smith Barney Analyst Kyle Cooper, the moderation in weather last week will result in a estimated build of 41 to 51 Bcf in this Thursday’s Energy Information Administration storage report.

Last Thursday the market was shocked by a 48 Bcf withdrawal for the week ending April 11. A year ago the market injected 69 Bcf and the five-year injection for this week has averaged 36 Bcf. Driven by back-to-back weekly storage withdrawals, U.S. underground stocks currently stand at just 623 Bcf, which is a record low and is nearly 50% less than the five-year average for this time of year. Translation: While slightly bearish in the near-term, storage is still a card solidly stacked in bull traders’ deck.

Storage may not be the only factor out there that is sending the market mixed signals. Also open to interpretation are technical factors, which have been bullish, but are now suggesting the market may have hit an intermediate-term top. “We put in a non-trend day on Thursday and then failed to take out the high [Monday],” said Tom Saal of Commercial Brokerage Corp. in Miami. “Whenever you settle for the week so close to that week’s high, it is a good bet that you will test that level on the open Monday. We pushed within a penny of last week’s high of $5.83, but ultimately came up short,” he continued.

While not yet ready to throw in the towel on the “up phase,” Craig Coberly of GSC Energy in Atlanta acknowledges that the market may have a difficult time reaching his objective of $6.13. “On Thursday I thought gas might reach the $6.13 area during the first ‘up’ phase; however, this now looks problematical and the first ‘up’ may be complete,” he wrote in a note to customers Monday.

Specifically, Coberly looks for a daily close in June futures below Gann support in the $5.65-67 area. “When gas closed below this support line, we’ll look for sideways to lower prices for about a week to ten days as the ‘down’ phase retraces some portion of the rally we’ve seen sine the April highs. Returning to the $5.36-47 area is a reasonable alternative.”

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