After gaining 12.9 cents on Tuesday, June natural gas futures gave virtually all of it back on Wednesday as the prompt month eased its way closer to a test of the important $6 support level. On the day, the June contract settled at $6.129, down 12.3 cents from Tuesday

After trading higher in the Tuesday overnight Access session and opening Wednesday at the day’s $6.360 high, the prompt month wound its way lower for a majority of the session. June natural gas recorded the day’s low of $6.100 a couple of times before closing just above.

The petroleum futures complex also came off on Wednesday despite a mixed inventory report from the Energy Information Administration (EIA). While the 1.3 million barrels build in gasoline inventories was less than expected, it was still considered a sizeable addition. Crude supplies fell by 100,000 barrels, which was less than expected. As a result, June crude closed 84 cents lower at $68.69/bbl, while June heating oil and June unleaded gasoline dropped 3.03 cents and 5.10 cents, respectively, to settle at $1.9212/gallon and $1.9751/gallon.

“It really seems like $6.130 is the magnet right now for natural gas. We’ve been here a couple of times over the last few days,” said Brad Florer, a broker with ICAP Energy. “Looking at specific downside targets, $5.710 really stands out, but I don’t know if we will get there.”

Florer said that while there is still an “overall gravity” to the market right now, bears may be losing some faith as to how much downside is left. “I really think we are seeing people cover their shorts,” he said. “On a risk-reward basis, what happens when we come and there are reports of a hot temperature pattern and then word comes in that the first tropical storm has been sighted and is on path for the Gulf of Mexico? All of the sudden there is a whole lot of potential upside staring you in the face, and even if $5.710 is your downside target, you only have 40 cents left to the downside. I just think people are pushing their luck if they try to wait. If you are looking to pick it up here and it gets below $6, you’re just being cute if you are trying to hold out. That type of thing will end up smacking you in the head.”

Having said all that, Florer admitted that there is not anything bullish currently out there. “It is still mild, there is plenty of storage and the chart still looks pretty bad,” he said. “We have also decoupled from crude to a degree, so if crude moves up, it will have an impact on natural gas, but not as much.

“If you are a bull, you are still in hang out and wait mode. Nobody is diving in to pick a bottom yet because the market still feels heavy,” Florer said. “If you are short, you have to be a bit nervous here and start thinking about getting out.”

Looking at the EIA natural gas storage report for the week ended May 12, Florer said he is anticipating an injection of 84 Bcf to be revealed Thursday morning, which is also the projection that the ICAP derivatives auction settled at on Wednesday. A Reuters survey of 20 industry players believes 83 Bcf will be injected for the week.

Golden, CO-based Bentek Energy said Wednesday it expects a storage injection of 88 Bcf, resulting in 2,077 Bcf of gas in storage. The company said it believes 57 Bcf will be injected into underground stores in the East region, while 19 Bcf is deposited in the Producing region and 12 Bcf is added in the West region.

According to the EIA, 85 Bcf was deposited last year for the similar week and the five-year average injection is 82 Bcf.

Looking at Tuesday’s 12.9-cent gain, a New York floor trader said, “There was some fund buying at the end of the day going MOC (market on close).” He thought that Tuesday morning traders had “jumped the gun” with early buying, but “I think the market will trade $6.45,” he said.

Market technicians see the case for rising prices dependent on a continued strong advance. “We see no case for bottoming action without at least a break above $6.540,” said Walter Zimmerman, vice president of United Energy. He added that the failure to break above $6.540 keeps the door open for a further decline to the $5.780 to $5.630 area. “On a decisive break above $6.540 the $7.425 area becomes possible as the 0.618 retracement of the $8.280 to $6.045 decline,” he said.

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