Giving back almost everything gained on Monday, June natural gas futures on Tuesday traded between $6.31 and $6.47 before settling 5.8 cents lower on the day at $6.349. The settle lower was significant in the fact that trading on Tuesday saw somewhat of a divergence between natural gas futures and petroleum futures.

July crude made another run at the psychological $50 mark, reaching a high of $49.94/bbl on the day before settling at $49.67, up 51 cents. June heating oil and June unleaded gasoline finished up 2.06 cents and 2.82 cents at $1.3871/gallon and $1.4267/gallon, respectively.

However, weather, or more importantly the lack of seasonably warm weather, continues to fuel the bearish sentiment. Without increased natural gas demand spurred by mass air conditioning usage, the storage surplus looks to continue to grow, keeping downward pressure on prices.

“Based on the weather alone in the Northeast — as lousy as you can imagine; rainy and cold — the picture is one which places prices much lower,” said Jay Levine of Advest Inc. “If one were to factor in the current state of storage and inventories, it would be understandable that, once again — and perhaps for more sound reasoning this time around — the general market populace is bearish, if not grizzly.”

Levine noted that while he is aware and cognizant of existing fundamentals, technical and psychological influences “will undoubtedly keep the playing field more level than just fundamentals alone.”

As stated before, the near-term weather outlook is currently doing nothing to prop up price levels. This week the National Weather Service (NWS) forecasts below normal accumulations of cooling degree days (CDD) for the large gas-consuming markets of the Mid-Atlantic and Upper Midwest. For the week ending May 28, the NWS expects the states of New York, New Jersey and Pennsylvania to see zero CDD, nine below normal. The industrialized states of Wisconsin, Illinois, Indiana, Michigan and Ohio are forecast to receive zero CDD as well, and this is 17 below normal.

Both areas are struggling to make their normal quota of CDD. On a year-to-date basis, the Mid-Atlantic and Midwest states are well behind. From the beginning of the year, the Mid-Atlantic has accumulated only two CDD and the Midwest only 10, which puts the Mid-Atlantic down seven for the season and the Midwest 16 off the pace. A typical May for the Mid-Atlantic sees 23 CDD and the Midwest 49. The monthly norms are based on a 1971-2000 average.

However, much warmer weather could be on the way in a few weeks, according to the summer forecast released Tuesday by WSI Corp. (see related story). In the forecast, WSI is calling for a warmer than normal summer in many regions of the country, which could lead to surging power prices and competition for natural gas supply between electric power generators and gas storage operators.

But any warmth appears to be at least a couple of weeks off for some portions of the country. As a result, storage injections are likely to continue to receive a lift if current weather forecasts are realized. Estimates for last week’s injections are in the area of 97 Bcf , and this week’s tally could be just as stout.

Citigroup’s Kyle Cooper is calling for an injection of between 92-102 Bcf when the Energy Information Administration’s (EIA) natural gas storage report for the week ended May 20 is revealed. The report will be released at its usual 10:30 a.m. EDT time on Thursday.

“While temperature data alone would not indicate an injection that much larger than last week, pipeline data indicates an injection even further above last week than this estimation,” Cooper said. “A report within our midpoint would be considered quite bearish both on an absolute and especially on a temperature-adjusted basis. If the apparent supply/demand balance remains intact, inventories above 3,400 Bcf are considered possible by early November.”

According to the EIA, stocks are currently 223 Bcf higher than last year at this time and 291 Bcf above the five-year average of 1,308 Bcf. The build number revealed Thursday will be compared to last year’s 88 Bcf injection for the week as well as the five-year average build of 81 Bcf.

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