July natural gas futures put in another tight trading range on Wednesday as uncertain traders continue to search for bullish or bearish news that they don’t already know. Despite crude futures recording a new seven-month high on Wednesday, the front-month natural gas contract traded in a slim 13.6-cent range between $3.665 and $3.801 before closing out the regular session at $3.708, down a mere 2.3 cents.

Bearish traders could find fresh support for their case Thursday morning when the Energy Information Administration’s storage report for the week ending June 5 is released. Most industry estimates appear to be centered in the 105-110 Bcf range, which would be significantly larger than both last year’s 84 Bcf injection for the week and the five-year average build of 91 Bcf. However, even if a large build is revealed, some traders say the point is basically moot because the abundance of gas already in storage has already been factored into the market.

“I’m looking for an injection of 106 Bcf or 107 Bcf, which is large compared to historical comparisons,” said Tom Saal, senior vice president of energy trading at Hencorp Becstone Futures in Miami. “That said, we have an awful lot of gas in storage, so what’s a little more?”

Saal said the market has been seeing the same fundamentals for some time. “It looks like all of the information people normally trade off is already known for the time being, so I think we are just trading in the $3.500 to $4.500 range here,” he told NGI. “We are probing the lower end of it certainly and we’ll see where we go from here. Since the bearish factors have already been factored in, possible bullish impacts down the road could include hotter temperatures, hurricane scares or lower injections from the rig cutbacks. The other thing is the U.S. dollar. Everyone in this market needs to be aware of the influence of the dollar on natural gas prices. As an inverse relationship, if the value of the dollar goes down, prices should head higher — and vice versa.”

Saal said he still believes the $3.155 front-month low posted back on April 27 should remain safe. “I don’t think we’ll get down there again because we haven’t already. With as bearish as the current fundamentals are, we should have already tested it, but it did not happen.”

On Wednesday July crude recorded a high of $71.79 before closing at $71.33/bbl, up $1.32. Front-month crude hasn’t traded this high since Oct. 22, 2008 when it reached $71.80/bbl.

Recent new highs in crude oil have gotten the attention of natural gas traders, but for how long? “Although oil price strength has generally been shrugged off during the first couple of sessions this week, the fresh crude highs and upside acceleration in heating oil values have been difficult to ignore and has prompted some short-covering in the natural gas,” said Jim Ritterbusch of Ritterbusch and Associates.

He pointed out that the weak dollar as a factor was less in play for natural gas and said the fundamentals appeared “more negative in the gas than in the oil.” Ritterbusch advised a bearish trading posture.

According to Phil Flynn of Alaron, “Oil has been driven by the credit crisis. Oil has been driven by the dollar. Oil has been driven by the stimulative and inflationary effects of quantitative easing and record budget and trade deficits.” Flynn contends that if much of the gains in crude oil are dependent on perceptions of an improved economy, it won’t matter if the economy eases “because the Fed will print more money, thereby driving the dollar down and drying up oil.”

“We’re long July natural gas from approximately $3.900 — stop $3.670,” he said

Taking a more in-depth look at Thursday’s storage report, a survey of 25 industry players produced a range of injection expectations from 104 Bcf to 118 Bcf with an average build estimate of 109 Bcf. Bentek Energy’s flow model also produced a 109 Bcf expectation, which would bring stocks 2.7% above the five-year high and 22% above the five-year average. The research and analysis firm sees a 65 Bcf injection in the East region, a 28 Bcf build in the Producing region and a 16 Bcf build in the West region.

“Stocks are currently sitting at 2.4 Tcf with 23 weeks left in the injection season,” Bentek said in its weekly storage outlook. “If injections continue for the rest of the season at the level of the five-year average, stocks will end the season at 3.8 Tcf. So far this season injections have averaged 25 Bcf per week more than the five-year average, and if that continues, stocks would reach 4.3 Tcf.”

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