After opening higher but failing to test resistance at $4.38, natural gas futures checked sideways yesterday as traders caught their breath after Monday’s 25-cent price-erosion. During the open-outcry session Tuesday, the prompt June contract closed at $4.279, just about equally between Monday’s $4.239 close and its $4.32 high.

Market watchers agreed that yesterday’s consolidation was long overdue, considering the 24% price decline seen in gas futures since April 16. Also a factor in the market’s quiet behavior yesterday was apprehension ahead of what has become a weekly bear pill each Wednesday when fresh storage data is released by the American Gas Association.

While the tight range of expectations call for a 95-105 Bcf injection to fall in line with last week’s 102 Bcf refill, one seasoned Houston-based risk manager looks for 111 Bcf addition (65 Bcf in the East, 11 Bcf in the West, and 35 Bcf in the producing area). “Sure it’s a big number, but every possible variable that will produce a large injection is present right now in this market: mild weather, plentiful supply, and a strong contango in the market.” The real wildcard is the size of the injection in producing region. It appears that the powers-that-be in Houston right now are short and, therefore, are more than happy to contribute the full extent of their storage injections, he said.

On the technical side of the market, Cynthia Kase of New Mexico-based Kase and Company believes that now the market has touched her key objective at $4.23, one of two things is likely to transpire. “If we see little or no rebound off the lows here, I look for prices to continue lower, possibly down to the $3.70 level,” she said.

“However, if the market is able to rebound convincingly off the $4.23 level, I would look for prices to move back up to test the upper $4.00s….. The key number is $4.89, which represents a major retracement off of the $5.05 and $5.26 swing highs. A close, or series of closes above $4.89 could signal that we have put in an intermediate to long-term low,” she said.

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