Despite closing almost 2 cents up on the day, some market-watchers considered Tuesday a loss for August natural gas futures as morning trading levels as high as $5.96 could not be sustained. The prompt month tapped out at $5.805 on the downside in afternoon trading before settling at $5.837, up 1.9 cents on the day.

The $5.805 low kept a safe distance from Monday’s bottom of $5.77.

“The natural is holding above $5.75, which is important,” said George Leide of Rafferty Technical Research in New York. “On the other end of the spectrum, it is also not getting above $6.03, which is also important. My trading range strategy right now has been buying anything close to $5.75 and selling anything close to $6.03.

“I think we are going lower overall, but we first have to break $5.75, then $5.65, eventually reaching the $5.50 level. The only thing that will change my mind is if August trades back above $6.03. I’m having patience,” Leide said, noting that he is selling the rallies and currently buying around the $5.80 level down to $5.75.

While the market was unable to get below the mid $5.70s on Tuesday, it also failed to punch through the $6 level.

“I thought there was an outside chance that we would get above $6, but [traders] didn’t even wait for that,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “They just started selling the 90s. It’s a failure day, there’s no question about that.

“Now that it looks like we are going to have a tough time getting through $6, I think the next thing we are going to do is probe the downside and see if the scaled-down buying is still down there. I think it probably is.”

Kennedy added that natural gas has a much more limited downside than crude does. “Even if I were bearish, I could only in the near-term look for something like $5.50-5.60 on the natgas,” he said. “There is a lot of hedging to be done by the utilities yet. Crude on the other hand is still carrying a huge ‘fear’ premium in there.”

Looking ahead to the natural gas storage report, Kennedy said he is looking for a 93 Bcf build to come in for the week ended July 16.

Tim Evans of IFR Energy Services said, “While hope does spring eternal, we think the market still has its work cut out for it if it is to trend higher. Thursday’s DOE storage injection of 75-85 Bcf may be read as an improvement over the 108-109 Bcf builds of the prior two reports, but it would still exceed the 69 Bcf average tally of the past five years, adding to the 54 Bcf year-on-five-year average surplus.”

In addition to contending with the five-year average figure, the net storage injection for the week ended July 16 will also go up against last year’s 77 Bcf build.

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