Trading within a slim 16-cent range on the day, July natural gas on Tuesday managed only a high of $6.45 as the contract built upon Monday’s losses. After reaching a low of $6.290 just before noon EDT, the prompt month limped in to close at $6.385, down 7.8 cents on the day, bringing the week’s loss-to-date to 23.8 cents.

Despite the loss, some within the industry think natural gas traders are biding their time until summer heat shows up or the Atlantic hurricane season begins in earnest.

“I’m not sure Tuesday’s decline meant very much. I think a lot of this is consolidation,” said Brad Florer, a broker with ICAP Energy. “I think you may see bears take one more shot at a nice downside push, but I think they are running out of room with summer moving in and the potential for hurricanes. Every day that ticks by is limiting the downside. There are probably still some ultra-bears who are looking at the storage surplus and thinking that they can make $5.71 a possibility, but I am starting to have my doubts that we can get back down there. The risk-reward curve is making it a worse and worse play to be short as we get deeper into the summer.”

As for when the market will bounce, Florer said it probably would not take much. “Temperatures are pretty mild so far for the country,” he said. “All it will take is the first heat wave and the formation of the first couple of tropical storms. Once we get those, I think we’ll see this market start turning.”

Looking at the crude-natural gas relationship, the broker said there is still a link there. July crude on Tuesday finished a dime lower at $72.50/bbl.

“We are definitely linked to crude, but it is a much looser relationship than it has been,” Florer said. “Natural gas clearly does not move independently. We may move independently for a day, but it is not going to stay that way. You can’t forget about that relationship. In the crude futures market it is very hard to get short with all of the political tension going on all over the world. You can’t risk being short and coming in and having a headline blow you out.” Florer added that he believes this dynamic lends support to the natural gas futures market.

“As far as the seasonality of natural gas, usually you get your bottom put in somewhere between the end of May and the end of July, so people are going to start looking at that,” he said. “I think we are going to see more and more shorts losing confidence. That’s not to say that I am looking for any big upside turn in the immediate near-term. I think we are going to continue to see this thing chop up and down. We might get back below $6 again, but I don’t have much confidence in a very big downside right now.”

While hurricane hype continues to permeate the market, weather bulls looking for tropical weather have to go all the way back to 1966 to find a June hurricane. One of the problems with early hurricane development is that there is not enough warm water around to fuel a major storm. Currently the Gulf of Mexico and Caribbean are warm, but the Atlantic Ocean is not, thus any early season storms have only the warm waters of the Gulf and Caribbean to draw upon.

AccuWeather research shows that a tropical depression formed on June 4, 1966, near the Honduras-Nicaragua border and moved northward into the Caribbean Sea where it strengthened into Tropical Storm Alma by June 6. Alma then continued north-northwest passing as close as 20 miles from the southwest Florida coast before turning to the north-northeast and finally coming ashore during the afternoon of June 9 near Alligator Point, FL as a Category 1 hurricane.

“When it came ashore in northern Florida, Alma set a record for the earliest date a hurricane made landfall in the United States, a record it still holds to this date,” AccuWeather said.

Market technicians are not expecting the pervasive downtrend to continue. Analysis of the recent advance from the $5.750 low when the June contract expired on May 26 suggests that prices may not have much room to fall further.

“We are looking to the ratio retracements of the $5.750 to $6.820 rally for support,” said Walter Zimmerman of United Energy. He noted Tuesday morning that Monday’s $6.410 low was the 0.382 retracement, and he expected Tuesday to be a down day as well. “We do not expect new lows. The 0.618 retracement is $6.160 and the closing basis must hold for the bulls is the 0.7862 retracement at the $5.980 level.”

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