Satisfied with the one-day 23.6-cent drop afforded to the natural gas bears on Monday, the bulls were back on the warpath on Tuesday, pushing June futures to a high of $11.649 before the contract closed the regular session at $11.422, up 12.1 cents from Monday’s finish. Despite the gain, some market watchers say time might be running out on the recent trend higher.

One broker said the end of the bull move might be in sight if technical indicators are any gauge. “While we are making new highs for the move, we very noticeably are not making new highs on some of the internal technical indicators,” said a Washington, DC-based broker. “The momentum on these moves is dwindling. On each occasion — March 14, April 28 and May 12 — we made a significant new high, some of the momentum indicators and other analyses have not registered new highs. This is sort of a technical sign of the failing strength of the bull move.

“Tuesday was a good example. We had a big drop on Monday but came roaring back on Tuesday. However, we came a few cents shy of Monday’s $11.675 high for the move. We still have not gotten a sell signal on any of the indicators, but they are starting to detect less momentum in each rally. I tend to think this will become fatal to the bulls…and I think that time is coming sooner rather than later. Even with the storage concerns and the start of the Atlantic hurricane season right around the corner, the bear case counters with the return of Independence Hub production soon and higher than expected production levels coming out of the Barnett Shale.”

Looking at key price levels, the broker said he sees first resistance up at $11.675, followed by $12 and $12.250. On the support side, he said the first major support area doesn’t come in until $10.480.

While some top traders see the near-term end of the bulls’ current reign, the song remains the same for others as summer moves closer. Some market experts see the market under continued stress as the risks of filling storage in a timely fashion are increased by potential weather-driven power generation demand and production outages caused by tropical storm interruptions.

“While we have been describing the natural gas fundamental balances as bullish, we are also cognizant of the fact that a relatively low level of storage is not a critical pricing element during the low-demand shoulder period,” said Jim Ritterbusch of Ritterbusch and Associates. He added that he still regarded the “summer portion of the curve as highly vulnerable to even minor supply side shocks during the coming months.”

Attention was brought Monday to potential Gulf of Mexico supply shocks when prominent AccuWeather meteorologist Joe Bastardi released his expanded 2008 Hurricane Season Forecast. Bastardi said “the Gulf of Mexico will have a normal distribution of tropical cyclone activity, with energy interests experiencing at least seven to 10 days with disruptions or threats of disruptions. Specifically, the forecast is for two or three storms that affect the energy infrastructure in and around the Gulf and bring at least tropical storm force winds to the Gulf Coast, including one or two that bring hurricane force winds” (see Daily GPI, May 13).

Bastardi’s comments notwithstanding, Ritterbusch does not see hurricane activity as presently being any kind of market force. Although “a spike in [electrical generation] demand as a result of hot temps or early hurricane activity that inhibits Gulf Coast production are not currently market issues, they could easily force a larger risk premium into the deferred futures should storage injections fall short of normal tendencies as was the case last week,” he said.

Crude futures also appear to still be giving natural gas directional price cues. On Tuesday June crude rebounded to notch a $126.50/bbl high before closing at $125.80/bbl, up $1.57 from Monday’s finish.

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