Pressured by mild weather and weakness in the nearby crude oil pit, natural gas futures slid lower Wednesday as traders continued to retrace gains made during the first half of the month. However, after extending to a double-digit loss in the morning, the May contract battled back in the afternoon as traders positioned themselves ahead of Thursday’s storage report. The prompt month closed at $5.569, down 7.6 cents for the session, but up 4.9 cents from its morning low.

Traders polled by NGI Wednesday were quick to point to losses in crude oil futures as a contributing factor to the sell-off in natural gas. June crude tumbled $1.34 or almost 5% of its value following the Energy Information Administration (EIA) announcement that U.S. crude oil stocks grew by a whopping 9 million barrels last week. Expectations had centered on a build of 2 million barrels, sources reported.

Also of bearish influence for natural gas prices Wednesday were weather forecasts for the next week to 10 days that continue to call for mild temperatures across much of the country. But traders are more anxious to get a bead on the supply component of the market. The EIA will release updated storage data Thursday at 10:30 a.m. EDT, and once again this week there is a wide range of market expectations.

Tim Evans of IFR Pegasus in New York believes that even a number in the top end of the market’s 20-60 Bcf injection spectrum would be open to interpretation. “We continue to anticipate a 50-60 Bcf build in DOE storage for last week as something of a Rorschach test for traders. It will be somewhat bearish relative to a 36 Bcf five-year-average injection, but bullish compared with a 69 Bcf build from last year.”

On the other hand, daily technical factors are leaving less and less up to interpretation following a key failure to the upside Monday and the accompanying break to the downside Tuesday and Wednesday. Citing the rising Gann support line, which was broken by June’s drop below $5.72 Wednesday, Craig Coberly of GSC Energy in Atlanta looks for sideways to lower prices for about a week to 10 days. “Returning to the $5.30-41 area is a reasonable objective. The lower Gann support line, $5.22-30, should be the practical downside maximum,” he wrote in a note to customers Wednesday.

Similarly, Jay Levine of New Hampshire-based Advest Inc. is leery of the market’s strength following May’s sub-$5.60 close. “Support below this, in my opinion, is back in the mid/low $5.40’s, which [could be the market’s] first downside target,” he said. On the upside, Levine sees resistance in the mid-$5.70s. Should that level fail to repel a rally, buying in the form of short-covering by both new and old shorts could enter the fray.

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