July natural gas futures went out with a bang on Wednesday as the contract broke two significant patterns en route to its close at $6.929, up 5.2 cents from Tuesday. Not only did the contract break the streak of seven consecutive regular session lower closes, it also was the first expiring prompt-month contract in five months not to go off the board in the $7.50s.

Trading in a 20-cent range on the day, July natural gas put in a $6.770 low Wednesday before moving higher to close. August natural gas futures carved out a low of $6.900 before finishing the day at $7.083, up 8.1 cents.

“After four straight months of expirations in the $7.50s, we ended up breaking that pattern on Wednesday,” said Steve Blair, a broker with Rafferty Technical Research in New York. “The $6.800 level remains pretty good support. With July now gone, that same support level applies to August. While I think the market could be a lot lower based on storage levels, I think the futures market is comfortable at this current price level. We aren’t going to see much more collapse to the downside just a few days shy of July, when there is a much better chance for sustained hot weather or some tropical developments.”

Blair noted that the market will likely stay around the current price level until something changes fundamentally, whether that is sustainable hot weather or the lack thereof. “If we get some heat or some tropical activity I think the market will show a significant rally. If we get both at the same time, then watch out,” he said. “However, if we go two more weeks with no forecasts of heat or storms, then it is possible we could head to even lower price levels, although the downside is limited at this point.”

Commenting on the recent sustained drop in futures prices, which saw losses of $1.041 over the seven regular trading sessions prior to Wednesday, Blair said, “The market had no business being as high as it was in the first place. Based on storage levels and other indicators, futures did not belong up at $7.500 to $8.000,” he said. “These funds and speculator bulls were doing their best to keep the market propped up in the hopes that the country would see some sustained hot weather or some storms swirling down in the tropics. The failure on both counts meant the bulls could only keep the price elevated for so long before it collapsed under its own weight.”

Longer-term forecasts show below normal temperatures in the populous New England and Mid-Atlantic energy markets. AccuWeather’s six- to 10-day forecast shows below normal temperatures north and east of a broad arc extending from northern Michigan to northern Virginia. West of another broad arc extending from North Dakota to Iowa to West Texas is forecast to experience above normal temperatures. The vast expanse of the Mississippi Valley is predicted to experience normal temperatures.

The National Hurricane Center also reported Wednesday morning that no tropical cyclone formation was expected in the next 48 hours.

Some traders are just looking at recent price action and see prices stabilizing at still lower levels. A New York floor trader noted that if prices broke below $6.790, then a fall to $6.560 was possible. “I think prices struggle here and then fall back again. The market feels very heavy,” he said.

According to a Bloomberg survey of 11 analysts, an 80 Bcf injection, the median of the survey, is expected in Thursday’s Energy Information Administration (EIA) inventory report for the week ended June 22. A Reuters survey of 23 industry players produced an average expectation of an 83 Bcf build. According to date-adjusted EIA data, 68 Bcf was injected last year for the week while the five-year average injection rests at 92 Bcf.

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