After dropping 18.1 cents on Monday, the natural gas futures prompt month on Tuesday chose to follow crude’s lead and probe the upside. With only a few days left until expiration, the July contract notched a 7.3-cent gain to close at $6.412. Action was light Tuesday, as 52,035 contracts changed hands.

Despite the uptick, most market watchers weren’t ready to dismiss Monday’s downturn and go bull riding just yet. “The market did some damage Monday by leaving the gap between $6.49 and $6.495,” George Leide of Rafferty Technical Research in New York said, noting that it left a “very negative formation on the chart.” He said the crude rally helped natural gas higher on Tuesday, as crude appeared to take its cue from gasoline’s strong move higher, as well as continued unrest in the Middle East, where a South Korean hostage was executed by Iraq insurgents.

“The market is looking lower after gapping down [Monday],” Leide said. “If it doesn’t get back above $6.50, it should continue to work lower. If we stay below, we could trade back below $6. It remains to be seen because it is too soon to tell. If it gets back above $6.50, it puts the market back in neutral mode, with the next resistance level up at $6.65 to $6.80.”

Tim Evans of IFR Energy Services agreed that the upside probe Tuesday was a result of the natural gas market taking advantage of a firmer petroleum complex. However, he continues to wonder whether it has fundamentals of its own to sustain a push higher.

“Certainly we expect a supportive DOE storage report on Thursday, with 75-85 Bcf in net injections falling below the 94 Bcf five-year average for the period,” Evans said. “However, with the Palo Verde nuclear plants back on the grid this week and a lower level of forecast cooling degree day accumulations, it would appear the market lacks for a bullish encore. The weather outlook into the first week of July also looks fairly benign. So while the market has had high hopes that summer heat and hurricanes” would come into play, “these factors have yet to take hold as a fundamental reality.”

The Energy Information Administration’s natural gas storage report for the week ended June 18 will be compared to some pretty lofty historical data. In addition to the 94 Bcf five-year average, the report to be released Thursday morning at its regular time will also go up against last year’s mammoth 127 Bcf build.

With storage currently sitting just 9 Bcf above the five-year average, this week’s report could conceivably put the country back into a deficit to the five-year average.

Kyle Cooper of Citigroup is calling for a build between 85 and 95 Bcf. “Expectations, based on weather forecasts, are that injections return to above the five-year average rate after next week,” he said. “While this market is still obsessed with the summer, prices are expected to continue on a defensive path considering the petroleum market and weather forecasts. We still expect inventories to end October near to slightly above the 3,100 Bcf level.”

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