With little in the way of fresh fundamental news, natural gas futures moved sideways Friday, as traders held the market to an extremely tight, six-cent trading range. A modest downtick at the closing bell was enough to pressure prices below unchanged on the day. The July contract finished at $3.742, down a half-cent for the session and 23.7 cents lower for the week. Since becoming the prompt month nearly four weeks ago, July is down 6.8 cents after trading as low as $3.67 (May 30) and as high as $4.44 (June 12).

As is usually the case on Friday, traders took a moment to reflect on the week’s price action. Citing the fact that July was able to remain above support at $3.67, bulls believe the market has already made its lows. Bears, on the other hand, have a bevy of factors in their favor, including strong production figures, mild weather, and a downtrend that remains solidly intact.

Above all else, however, storage is the bears ace-in-the-hole. Since the injection season began 11 weeks ago, the weekly storage report has pressured futures lower for an average decline 14.6 cents on 10 of 11 Wednesdays. And for good reason — all told, 982 Bcf has been added to underground storage facilities since the beginning of April, compared with 463 Bcf during that same period a year ago.

However, for Ed Kennedy of Miami-based Pioneer Futures, the strongest injection figures already may have been realized. Accordingly, he looks for a 90-100 Bcf injection this week, which would fall short of the 99-117 Bcf range of injections seen over the past eight weeks. Maintaining that the market may be adequately priced for now, Kennedy looks for the next price clue to come not from this week’s storage figure, but from the weather. “There is talk out there that production is outstripping demand by as much as 8 Bcf/d, but it is difficult to know for sure because production figures from the Department of Energy lag the market by several months. So we will know in three months. Until then, all you really have to go on is people’s perception and the cash market.”

That said, Kennedy is anxious to see how the cash market reacts when the first blast of hot weather arrives. If the cash market reacts by sending prices higher, then he believes supply may be 2 Bcf or less greater than demand. However, if the hot weather does not send prices higher, then an 8 Bcf/d surplus may be a little more realistic, he concluded.

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