Buoyed by two distinct buying surges, natural gas futures shuffled higher Tuesday as commercial futures traders reacted to rising temperatures across most areas of the country and strong demand in the nearby physical market. While losses Monday were spread out almost equally across the entire natural gas strip, Tuesday’s gains were front-loaded with the August contract receiving a 12.9-cent boost to $3.282. By comparison, the 12-month strip advanced just 9.6 cents to close at $3.715.
Traders were quick to point to heat-related dime-plus increases at most cash market points as a prominent factor in the futures market gains yesterday. Henry Hub surpassed its $3.12 first-of-month posting for the first time thus far in July yesterday by pressing 8 cents higher to an average price of $3.18.
While temperatures are expected to remain hot across portions of the South and Midwest into the weekend, moderating readings will be seen in the Northeast, lowering electric demand in that corner of the country. That coupled with the likelihood for another bearish storage report has most traders looking for downward price correction Wednesday. The AGA won’t release its weekly storage survey results at 2 p.m. (EDT) today, and the market is bracing for another “big number.” Most expectations are for a net injection of 100-115 Bcf, with Thomas Driscoll of Lehman Brothers ducking to the low side with a 95 Bcf estimate and Tom Saal of Miami-based Pioneer Futures taking the high road with a 118 Bcf refill prediction. Last year at this time the market added 97 Bcf into underground storage facilities, and the 5-year average is 82 Bcf.
The technical picture, meanwhile, is mixed. By virtue of a higher low and a lower high, natural gas futures completed an inside-day on the daily chart Tuesday. The market’s inability to press outside of Monday’s range is neither bullish nor bearish. However, while August futures closed near its low Monday, it finished near its high yesterday, prompting some to suggest that bulls, with locals in tow, will make an attempt at recent highs in the $3.335 to $3.365 area. Major support, on the other hand, is seen at the psychologically important $3.00 mark.
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