Not ready to back of off its 36.9 cent jump Monday, the June natural gas futures contract instead continued on its upward path, recording a modest gain Tuesday of 3.8 cents to close at $6.269, while trading within a $6.235-6.36 range.

“Today we punched up a little bit higher after the huge move yesterday, but I still would say that I am [uncertain] right now on this thing,” said a Washington, DC-based broker. “The strength of the liquids gives me some reason to hold on here and not just be a complete bear on it, but how many times do you see a 50% retracement, then it heads back down again.”

Citing the high of the move in January of $7.63 on the perpetual chart, down to a low in early March of $5.06-5.07, the broker said that if you scale back Fibonacci numbers from that, the $6.045 mark would constitute a 38.2% increase from the floor. “Once we went through that, you probably got a whole bunch of technical buying coming in,” he said. “Then when you broke through the $6.11 high on the June chart, that just accelerated the buying.”

Noting that Tuesday’s trading hit off of the 50% retracement of the move (which comes in at $6.347), the trader was interested to see whether the market on Wednesday will be able to hold its current position, or slide a little bit. “In the face of the strong increases in the liquids markets, I would say if gas futures do slide, then they really don’t want to be up here.

“If we had gone through that $6.35 number and closed at $6.38, I would have told you that the next number on my chart would be $6.65,” he said. “We’ve been having a strong rally since March, a period that one would normally tend to think would be weaker for natural gas. We have not seen that.”

Failing at the 50% retracement level is a “fairly significant” sign that bears are lurking, he noted, adding that it will be an interesting storage report on Thursday because California has had air conditioning demand, while New Orleans has been experiencing some record low temperatures.

“You might actually have some decent natural gas demand going on here, so it might not be that bearish of a storage report,” he said. “I would normally say that if you fail at the 50% retracement, then you will be testing back down again — at least to that $6 level. However, with crude up a buck Tuesday, I think it might mute that significantly.”

Kyle Cooper of Citigroup is calling for a build between 64 and 74 Bcf for the week ending April 30. This will compare against a build of 82 Bcf last year and a build of 65 Bcf for the five-year average. “Our current projections are that inventories [will] easily rise above 3,000 Bcf by the end of October with levels above 3,100 considered very likely,” Cooper said.

The average expectation of the industry is for a build between 70 and 76 Bcf.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.