Capping off a wild week of trading that saw wide swings, the June natural gas futures contract finished the week at $6.353, down 4.8 cents from last Friday’s $6.401 close. The big news on Friday was the strength of natural gas, despite a crude futures sell-off.

The natural gas prompt month managed to climb 2.9 cents on Friday while trading within a $6.25-6.39 range.

After an uneventful Monday, futures collapsed 27 cents on Tuesday, only to be followed by a 30.1-cent climb on Wednesday. On Thursday, the EIA’s report of an 85 Bcf injection into underground storage for the week ended May 14 was enough to push June futures over the previous $6.52 high. The contract traded at $6.57 early on Thursday before closing at $6.324, down 13.1 cents on the day.

Commenting on Thursday’s peculiar zig-zag following the storage release, Craig Coberly of GSC Energy in Atlanta said, “Gas couldn’t sustain the rally and reversed down [Thursday]. This supports the outlook that gas is in a sideways to lower pattern that will retrace some percentage of the rally from the February low.”

Coberly noted that trading below $6.14 will be very good confirming evidence that the outlook for a few weeks of sideways to lower movement is correct. If this occurs, he looks for trading in the $5.86-5.90 range as a likely objective for the decline. “Trading above $6.57 does not fit this intermediate term bearish outlook,” he said. “I doubt that this will happen, but if it does, the bearish outlook will be invalidated and a move into the $6.92-7.00 area will be likely.”

Friday’s climb — albeit only a 2.9-cent bump — was seen by many as a strong showing in light of crude’s weakness. The Nymex July crude futures contract shed 87 cents in Friday trading to close at $39.93/bbl.

“The market’s ability to hold its ground in spite of the drop in the petroleum complex is constructive, but not necessarily conclusive,” said Tim Evans of IFR Energy Services. “Further declines in that market might still convince natural gas to move lower.” While recent unimpressive storage data teamed with the upcoming Memorial Day holiday weekend might result in some downside vulnerability, Evans said he continues to like the long-term fundamentals for the natural gas market, citing forecasted summer heat and hurricanes.

As if the natural gas market needed more bullish indicators, forecasters at the National Oceanic and Atmospheric Administration (NOAA) last week predicted an above normal Atlantic hurricane season, echoing an updated hurricane forecast issued in early April by Colorado State University (CSU) hurricane forecasters William M. Gray and Philip J. Klotzbach (see Daily GPI, April 5).

Evans said the heat and hurricanes “are likely to limit storage injections and we think storage will be below average next fall as a result. The question for us is not whether prices will eventually move higher, it’s more a question of what side trips it might make along the way.”

Others noted that the market is not entirely comfortable at current price levels. “The market is a little schizophrenic up here,” said Tom Saal of Miami-based Commercial Brokerage Corp.

For quantitative proof of the uncertainty, Saal pointed to the latest Commitments of Traders data released Friday. According to the Commodity Futures Trading Commission, non-commercial traders reduced their net long exposure 9,249 positions to 14,243 for the week ending May 18. During that time the market lost 20 cents, Saal noted. And although prices rebounded Wednesday, Saal is skeptical of the market’s ability to hold onto recent gains. “Tuesday’s move could be the beginning of the end,” Saal hypothesized.

The 85 Bcf natural gas storage build for the week ended May 14 fell exactly in the middle between the five-year average injection of 80 Bcf and last year’s injection of 90 Bcf. The number came in a little below the 90-95 Bcf market consensus. Working gas in storage as of May 14 stood at 1,388 Bcf, which is within the five-year historical range, according to EIA estimates. Stocks are now 398 Bcf higher than last year at this time and 15 Bcf below the five-year average of 1,403 Bcf.

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