Coming off Thursday’s near 35-cent drubbing, July natural gas futures rebounded on Friday but failed to finish the week north of $13. The prompt-month contract traded between $12.967 and $13.185 on Friday before closing the regular session at $12.994, up 13.3 cents from Thursday and 36.9 cents higher than the previous week’s close.

“The journey above $13 during the week was not that surprising. Neither was Thursday’s pullback for that matter,” said Steve Blair, a broker with Rafferty Technical Research in New York. “We basically got to a high of $13.350 on Thursday, which is almost on top of our major resistance level of $13.365. When we failed, we dropped to a low of $12.625 — which is very near our major support numbers — before rallying. We are playing it back and forth between our numbers. While the 57 Bcf [storage] injection report Thursday was expected, it does put us further behind both year-ago and five-year average levels. That does not help with perception. In addition, we’ve got eyes on the tropical weather situation. While it is still early for major development, you never know.”

Blair noted that the petroleum markets once again “stole the show” on Friday with renewed tension in the Middle East and the continued problems in Nigeria. Partially recovering from Thursday’s $4.75/bbl drop, July crude on Friday regained $2.69 to close at $134.62/bbl. “There is a lot of attention being paid to the petroleum sector right now, which leaves the natural gas market as the forgotten child,” he said. “Natural gas is going to come to the forefront in the next couple of weeks as we get closer to the real potential of severe tropical weather.”

Despite the sizeable run-up in natural gas futures values over the last few months, the broker said he believes the upside is still vulnerable. “I would not be surprised if we tested out that $13.350 high again, and if we continue to have small storage builds or significant tropical weather, we could see $14 gas or even test the all-time futures high of $15.780.”

Thursday’s 34.9-cent drop registered by the July contract came as something of a surprise since the Energy Information Administration storage report showed a modestly bullish 57 Bcf build. Nonetheless, traders are focusing on the ongoing supply deficit as a supportive market force.

“While the market ignored the seemingly supportive weekly storage figure, the widening supply deficit is still a force that will need to be reckoned with as the summer proceeds. Consequently, we are viewing this price correction as setting up a buying opportunity,” said Jim Ritterbusch of Ritterbusch and Associates.

Ritterbusch is quick to acknowledge that Thursday’s price plunge also had technical factors behind it with chart support as low as $12.540, but the supply gap widened. “With the storage shortfall against both last year and the five-year average stretching by another 33 Bcf, price pullbacks could prove brief and limited. The deficit against last year now stands at a substantial 376 Bcf, a difference that will need to be largely closed if supply is to prove ample ahead of the next heating season,” he said.

Other traders also see a window of opportunity. “Every time we get some dips, some of our accounts are trying to buy. They were trying to buy around $12.500 after the market made its low. We moved the buy orders up to $12.700 and didn’t get hit on that,” a Denver marketer said.

He added that the feeling was that the market was breaking on the petroleum-related news but it would be a short-term decline. “Natural gas has been in a steady push higher, and if we continue with this warm weather and light builds, traders could push this market up to the $14 level pretty quickly.”

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