In another session marked by choppy trading activity, natural gas futures shuffled sideways Friday as bullish technicians and bearish analysts clashed in the court of industry opinion. And while each trading faction had its moments, little was resolved by Friday’s $6.51 close, which was down just 1.1 cents for the session and near the middle of the market’s wide $6.350-625 daily trading range.

Feeding off gains notched Thursday, bulls struck first at Nymex Friday morning. The July contract opened at $6.50 and quickly climbed to a mid-morning high at $6.625. However, just as was the case on the forays above the $6.50 level Wednesday and Thursday, producer selling was seen again Friday and proved stout enough to cap the rally.

Also seen as a factor Friday was pre-weekend profit-taking by long traders who had persevered through last week’s many stomach-churning dips. After opening the week at $6.27, the July contract was a picture of volatility. Though only experiencing a large net price change in one session (Thursday), the contract etched out trading ranges of 24 cents or greater in four of five trading sessions last week.

Looking ahead, this week will once again shape up as an epic battle between storage bears and technical bulls. With the market having just made a long slow climb off the $5.00 low of early April, it is clear that bulls have had the upper hand of late. However, the large storage injections the market has notched lately will become increasingly hard for the bulls to fight through.

According to the Energy Information Administration, U.S. gas storage levels increased a record-setting 114 Bcf to 1,199 Bcf during the week ending May 30. Although storage is still 755 Bcf less than last year and 484 Bcf less than the five-year average, the quick pace of refills over the past month has caught the eye of market watchers and Wall Street analysts.

By calculating weather-normalized injection rates over the last four weeks to be 2.8 Bcf/d stronger than the five-year average, Thomas Driscoll of Lehman Brothers in New York estimates that given normal weather, storage stocks will reach roughly the 2,890 Bcf mark by Oct. 31. Slicing the storage pie slightly differently, Kyle Cooper of Citigroup in Houston calculates that storage injections over the past four weeks have averaged 25 Bcf (3.6 Bcf/d) above the historical regression. “If this persists through the balance of the injection season and temperatures match the five-year average, then storage levels would rise to 3,035 Bcf,” he wrote in a note to customers Thursday.

And while storage may point to lower prices, technical analysis is still calling for higher prices. “Gas held above support levels [Thursday]. This keeps the rally intact and on schedule to reach our objectives,” wrote Craig Coberly of GSC Energy in Atlanta in a note to customers Friday. His objectives, which are based on less bullish, nominally bullish and more bullish cases, are $6.79, $6.90-7.00 and $7.37 respectively.

On the downside, Coberly would re-evaluate his outlook in the event prices break below the Gann support line, which comes in at the $6.33-41 level Monday and moves up at the rate of 8 cents a day.

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