Lacking the punch that Monday’s 32.8-cent increase provided, July natural gas futures on Tuesday failed to back off much, keeping the $7.43 contract high from last Wednesday still firmly within reach.
“Natural gas really seems to lack follow-through in either direction,” Commercial Brokerage Corp.’s Ed Kennedy said, noting that the prompt month seems to be held within last week’s $6.88 to $7.43 range.
Despite the fact that crude and heating oil futures gave back some ground on Tuesday, the natural gas prompt month traded within a slim 13-cent range before settling at $7.228, down 3.2 cents from Monday. July crude dropped 62 cents to finish at $55/bbl, while July heating oil shed 2.45 cents to close at $1.6386/gallon.
“We didn’t really seem to come off [Tuesday],” said Steve Blair of Rafferty Technical Research in New York. “Natural gas seems to want to hold up here. As has been the case for quite some time now, the market is not paying much attention to the fundamentals and the fact that we have plenty of gas in natural gas storage.
“However, there is talk that with all of this heat in the Northeast this early that the storage report injection numbers are not going to look as good compared to their historical comparisons. This heat wave is supposed to break Wednesday, but that is not going to change what the injection is going to be come Thursday for last week’s activity.”
Blair said he thinks futures are stuck in this $6.88 to $7.43 range unless there is a really bullish storage injection number. He warned that because a lot of the industry is already expecting a lower injection and has factored it into the market, the report would have to reveal a significantly lower number to get any price action.
The Energy Information Administration’s natural gas storage report Thursday for the week ended June 10 will be compared to last year’s 95 Bcf injection as well as the five-year average build of the same number. Citigroup’s Kyle Cooper is looking for a build between 74 and 84 Bcf.
Weather also continues to factor heavily on natural gas prices. If weather bulls weren’t treated to enough of a move in Monday’s rally, they may only have to wait for the week’s weather to continue to unfold. The National Weather Service forecasts an above normal accumulation of cooling degree days (CDD) for the week ended June 18. The populous states of New York, New Jersey, and Pennsylvania are expected to receive 47 CDD, or 21 above normal.
The industrialized Midwest states of Ohio, Indiana, Michigan, Illinois and Wisconsin are forecast to endure 40 CDD or six above normal. Both areas are off to a running start for the Mid-Atlantic has already seen 75 CDD for the season or 26 above normal, and the Midwest has sweltered through 105 CDD or 14 greater than normal for this time of the season.
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