July natural gas futures showed some signs of weakness Tuesday, which had at least some traders wondering whether the 19.2-cent drop to $13.011 was something more than a small pullback in the larger bull move.

One of the more interesting things about the weakness in natural gas futures is that it came on the same day that crude futures were headed predominantly in the other direction. August crude futures on Tuesday were trading at more than $138/bbl before closing out the regular session at $137/bbl, up 26 cents.

“I still need another [natural gas] close below $13 for it to really pique my interest, but I also think there is a test at $12.600 coming in the near future,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “I really don’t see the bullish case here. I think we’ll visit support at $12.600 rather than make a run at the resistance up at $13.350.”

Kennedy said he still has trouble with the people who continue to see a supply problem. “The story from the bulls is that there is a problem refilling storage. I call horse feathers! Where are the supply problems? The bulls then will jump at you with the fact that the liquefied natural gas market [LNG] is an arbitrage market and that all of the supplies are going to the top dollar in Asia. Yeah, but liquids are up and offsetting the loss of the LNG. There is no supply problem and there is nothing storm-wise currently in the tropics that is worth a damn. That, of course, will change, but it is hurricane season. It comes every year. I once again guarantee with metaphysical certitude that by the end of the injection season we will be full. People wonder how much gas is considered ‘full’ The answer is whatever the utilities decide it is.”

If the market were to break below $12.600 meaningfully, Kennedy said the game then changes. “If we get down beneath $12.600, then that is a horse of another color,” he said. “We could start talking a top because that is a key support number.”

Supply bulls see upcoming weather as making little difference in the ongoing supply deficit. “It does appear that an exceptionally mild temperature environment will be required if the supply deficit is to narrow as the summer proceeds. Other than a small pocket of above-normal temps along the middle Atlantic coast, temperature expectations during the next couple of weeks don’t appear conducive toward strong [electric generation] demand,” said Jim Ritterbusch of Ritterbusch and Associates.

He added that moderate temperatures may lessen upward pressure on prices. “The market may still require some significant price declines in the petroleum complex if last week’s lows are to be tested again.”

In its 11- to 15-day forecast AccuWeather.com sees eastern and Midwest energy markets as experiencing normal temperatures. West of Maine, New Hampshire and Massachusetts to a north-south line extending from Wisconsin to southeast Kansas to central Texas is forecast to be normal. Broad sections of the Great Plains, Rocky Mountain West to central California, Oregon and Washington are expected to be above normal, and the West Coast is forecast to experience normal temperatures.

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