Natural gas futures turned lower Tuesday as traders once again found themselves choking down a double dose of bearish fundamental news. June options — which expired Tuesday — added to the selling pressure and the June contract spent its penultimate trading day in a downward price spiral. It closed at $5.90, down 21.9 cents for the session.

Traders polled by NGI Tuesday were quick to point to mild weather and weather forecasts as a major-league price depressant. After a brief spate of warm weather late in April, the eastern half of the country has suffered through a wet and chilly spring. According to the latest six-to 10-day weather forecast issued Tuesday by the National Weather Service, that trend is likely to continue through at least the first week of June as below normal temperatures are expected across the eastern half of the country except for Florida and the Gulf Coast.

And while this weather has made it difficult for early-season beach goers or sellers of barbecue grills, it has been a needed reprieve for storage players trying to catch up on gas reserves. Though still 45% below year-ago levels and 35% below the five-year average mark, the storage situation appears to be improving. The market injected a hefty 90 Bcf during the week ending May 16 and predictions are calling for another large build to be announced this Thursday.

Citing a modest accumulation of degree days cooling, Tim Evans of New York-based IFR Pegasus calls for a 90-95 Bcf storage refill to easily surpass the 72 Bcf injection of a year ago and the five-year average build of 73 Bcf. “The Memorial Day holiday and cool temperatures will probably mean even higher injections in the following report, extending the market’s run at trimming its large storage deficit,” he wrote in a note to customer Tuesday.

However, fundamental factors were not the only ones at work Tuesday. Also contributing to the decline, sources said, was option-related selling of June futures. As the futures price slid below the $6.00 mark, a secondary wave of June futures selling was seen from options traders who were short $6.00 June calls. When prices were above the strike, it was necessary for them to be long June futures. That long position was unnecessary the moment the price of June futures dropped below the strike price. Open interest at the $6.00 call was a considerable 7,600 contracts.

Because of the uncertainty surrounding the prompt month on its expiration day, most technicians have switched coverage to the soon-to-be prompt contract, July. By closing at $6.011 and above support at $6.00, July futures have the ability to rebound Wednesday, says consultant Craig Coberly of Atlanta-based GSC Energy.

“Assuming the present decline terminates in the $6.00 area as anticipated, the corrective wave pattern can be counted as complete,” he wrote in a note to clients. “In this event, we’ll look for gas to start a rally that is likely to move significantly above the $6.20 area.” However, if he is wrong and the decline moves below $5.92, he will look for a test of the next Gann support line in the $5.78-80 range.

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