Despite fresh forecasts suggesting this summer could be a hot one, the natural gas futures market turned lower Friday as traders took profits after failing to break above stubborn overhead resistance.

And although the day’s decline of less than a nickel is small compared to the overall price level, it was significant in that it delivered the prompt month to its first week-on-week loss in nearly a month. April closed at $5.582, down 4.9 cents for the session and 1.4 cents lower for the week.

Market watchers agreed that prices continued lower Friday on bearish follow-through coming on the heels of Thursday’s storage report. “Clearly the draw of 46 [Bcf] was below last year, [as well as] the three and five-year averages,” noted Citigroup analyst Kyle Cooper. “A cold January and early February wiped out a substantial inventory surplus to the three-year average and created an inventory deficit. Now, a couple of mild weeks has returned inventories to above the three-year average…It continues to emphasize the incredible role that mother nature plays with this market,” he wrote in a note to clients Thursday.

For much of the last month, market participants have bandied about the question of what will happen to storage refills if this summer’s temperatures are above normal. However, the talk has been mostly conjecture, based on the idea that after two relatively mild summers we are due for some hot weather. That conjecture changed to a legitimate forecast when the National Oceanic and Atmospheric Administration updated its long-lead weather outlooks Friday.

Specifically, NOAA predicts above normal temperatures will stretch across the entire southern third of the nation this summer, including all of California and, by August, the coast of the Pacific Northwest and most of the Mid-Atlantic and Ohio Valley. (see related story this issue).

Unfortunately for the bulls, the government’s weather outlook may have come too late to derail what some market watchers see as a bit of technical weakness in the near term. “Gas found resistance in the $5.70-77 area troublesome for the fourth day in a row,” noted Craig Coberly of GSC Energy in Atlanta. “The fast daily stochastic oscillator has turned down. Both the daily stochastic oscillators are at 80 & 80,” he wrote in a note to clients Thursday night.

Because the market proved him right Friday and closed below his “pivotal” $5.61 level, Coberly now calls for a test of initial support at $5.53 and possibly major support at $5.37-39.

A Washington DC-based broker agreed, but cited slightly different technical indictors. “Resistance held at $5.76 [and] Elliot Wave technicians might see the rally that moved from $5.03 on Feb. 24 as a fourth wave correction of the sell-off from $7.63 that began on Jan. 9. A final down leg should follow, testing $5.00 before the summer rally starts.”

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