Marginalizing the bearish damage done on Thursday, traders — after bouncing off of support just below $11.500 in the overnight session — pushed natural gas futures 22.9 cents higher on Friday to close at $11.703. The week, which saw June futures expire at $11.916 on Wednesday, also saw the July contract close 27.8 cents lower than the previous Friday’s finish.

“With a 52-cent gain Thursday and a nearly 23-cent drop Friday, I think it is pretty obvious that we are playing the technical numbers back and forth here,” surmised Steve Blair, a broker with Rafferty Technical Research in New York. “Natural gas futures also continue to act as somewhat of a clone of the crude futures market,” July crude Friday recorded a 73-cent gain to finish the regular session at $127.35/bbl.

“In natural gas, $12.140 is a major resistance level for us and $11.465 is minor support,” the broker said. “On Friday we got near support before we bounced. I think we will continue this technical play back and forth while natural gas waits for some direction, either from the petroleum sector or from the storage or weather fronts.”

Commenting on Thursday’s 87 Bcf storage injection for the week ended May 23, Blair noted that natural gas inventory levels continue to hover near the five-year average, even with the extended outage of the 900 MMcf/d Independence Hub in the Gulf of Mexico. “If the hub comes back on-line during the first half of June as scheduled, the injections week-to-week will begin looking even better,” he said.

Market students of seasonal factors and technical analysis see Thursday’s 52.1-cent plunge by the July contract to $11.474 as ominous. “It does not look good for the bulls. This is the seasonal peaking window. The sentiment is the most bullish since the $15.780 peak,” Walter Zimmerman of United Energy said, noting that market peaks are often characterized by overwhelming bullish sentiment. He added that both daily and weekly charts show Relative Strength Index divergence sell signals, and utilizing wave count methodology shows that if July closes below $11.120, there is a likelihood of “a sharp decline to the $10.080-9.460 zone. In the bullish case a multi-week period of congestion between $12.085 and $9.460 should then extend into the late summer,” he said in a morning note to clients.

Those who follow crude oil as a guiding force for natural gas prices may want to take a close look at what happened to the crude oil market following Thursday’s release of supply statistics. Expectations were for small gains in crude oil supplies to unchanged, but the actual figure came in at a whopping 8.8 million-bbl drop — decidedly bullish.

“When you look at the inventory expectations, especially on the crude oil side of the market, the psychology is fascinating,” said a Washington, DC-based broker. Crude oil inventories showed a much larger draw than the market expected, prices rallied briefly and then fell hard. “Natural gas rolled up with the crude, got quickly reversed, rallied a bit and then got crushed. I’m not so sure that there is the same level of ‘buy the dips’ in natural gas as there are in crude oil, but either way both attempted rallies [Thursday] and got wiped out.

“An undeniably bullish number, a surprise headline, a major rally and the rally gets destroyed — sounds like a market top to me,” the broker added.

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