Recording their fourth consecutive close lower on Tuesday on a streak of follow-through selling, July natural gas futures dismissed the surge of strength in the neighboring crude futures arena to close at $3.879, down 5.4 cents from Monday’s finish.

The second consecutive sub-$4 close lent a little more credibility to the recent push lower by the front-month contract, which reached a low of $3.827 during Tuesday’s regular session before inching higher to close. Over the last four regular sessions the July contract has dropped a total of 37.4 cents.

Tuesday’s creep lower was different from Monday’s action in that it wasn’t aided by weak crude activity. Monday’s 9.9-cent natural gas drop was accompanied by a $2.62 decline in the expiring July crude futures contract, while Tuesday’s natural gas decline was opposite a $1.74 hike in August crude futures, which settled at $69.24/bbl.

“The natural gas market is still trying to figure itself out here. While that process is taking place it would appear that the prompt-month contract is quite comfortable in the $3.500 to $4.500 range,” said a New York broker. “Traders are having to weigh the current mammoth storage surplus over historical levels and the lack of demand against the unpredictability of summer heat and Gulf of Mexico storms. It is a complicated equation to say the least because the potential bullish factors are currently incalculable.”

On the other hand, the current supply overhang is an all too well known quantity. As of June 12, working gas storage levels were 622 Bcf higher than last year at this time and 472 Bcf above the five-year average.

Citi Futures Perspective analyst Tim Evans said he believes that the string of triple-digit storage injections likely continued for the week ending June 19. The analyst said his early estimate for Thursday’s report is for a 103 Bcf injection, which would once again be much larger than historical comparisons. Last year for the similar week 85 Bcf was injected and the five-year average build is 84 Bcf. While the market is likely going to see its sixth consecutive triple-digit storage injection Thursday morning, Evans said he believes it might be one of the last.

“The natural gas market is seeing a bit of follow-through selling following Monday’s drop, with traders apparently no longer trusting the crude oil market to provide moral support,” Evans said. “We continue to see the year- on five-year average storage surplus as approaching a likely peak, with enough cooling demand in the near-term forecast to help trim that surplus beginning sometime by the end of July. We continue to see the market becoming progressively tighter as the second half progresses, with U.S. output forecast to fall 5.3 Bcf/d (9.1%) between February and December, according to the DOE [Department of Energy].”

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