Playing a little bit of “give-and-take” on Thursday and Friday, the June natural gas futures contract met Thursday’s 7.5-cent run-up with a 7.9-cent drop in Friday trading. The prompt month closed Friday at $6.401, after trading between $6.38 and $6.48 with 53,838 contracts changing hands.

The prompt month finished the week much like it started on Monday, with a loss. However, in between, the June natural gas contract saw three consecutive days of gains, even on Thursday, which saw a slightly bearish 76 Bcf storage report.

“Today was kind of a profit-taking day,” said Tom Saal of Miami-based Commercial Brokerage Corp., adding that it appears that the futures market is stabilizing. “One of these days it will come off real hard, but I don’t know when that is going to happen.”

Noting that the petroleum side of the market appears to be having some sort of spill-over effect on natural gas, Saal said, “I think futures have been thrusting higher, reflecting apparent tightness in the energy markets.”

While acknowledging that the natural gas market is well overbought, Saal warned that it could stay in overbought mode for a long time to come. “I’ve seen this market stay overbought for months.” Saal added that an overbought condition normally leads to a sell-off — but doesn’t necessarily result in an immediate downturn. He said the $6.65 mark still looms on the upside as possible resistance, while the $6.045 level continues to appear supportive.

Tim Evans of IFR Energy Services said that the natural gas market gave way Friday to light profit-taking ahead of the weekend, giving proof that technical resistance remains near the current futures level.

“From a fundamental perspective, we see the chance of a severe downdraft in petroleum prices as the most significant downside risk for natural gas, which has relied on strong petroleum prices as one justification for its gains of the past three weeks,” Evans said. The June crude futures contract set an all-time high Friday by reaching $41.56/bbl, before settling at $41.38. Both numbers blew away the old all-time high of $41.15, which was set during the ramp-up to Gulf War 1 in October of 1990.

“Otherwise, we see the fundamentals as fairly supportive going forward, with warmer-than-normal May temperatures helping to lend credibility for the long-range forecasts covering June-August,” he said. “Storage comparisons will be strongly bullish relative to last year’s swift accumulation, but injections may also fall below their five-year average. Thus, while we see near-term downside risk related to a reversal in crude oil’s prospects, we remain friendly to its further upside potential over the longer term.”

The Energy Information Administration’s (EIA) natural gas storage report for the week ended May 7 was 1 Bcf higher than the general industry consensus of 75 Bcf, continuing the string of almost dead-on predictions by analysts and market-watchers. Despite the fact that projections were on course, Thursday’s storage number appeared somewhat bearish when compared to the five-year average build of 69 Bcf and last year’s 64 Bcf build for the corresponding week.

Taking an initial stab at what the storage number will be for the week ended May 14, Kyle Cooper of Citigroup said he is looking for a build in the 90 Bcf range and possibly higher. “A build in this range would maintain a bearish temperature adjusted supply/demand balance in our opinion,” he said. “Weekly injections that maintain these relationships should eventually lead prices lower.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.