After spiking 43 cents on frenzied buying Monday, natural gas futures sifted lower Tuesday as traders took profits on bearish weather forecasts as well as expectations calling for a large storage injection to be announced later this week.

When an early session uptick failed to reach Monday’s $5.715 high, sellers were quick to punish the June contract. Weak longs who had entered the market on Monday’s rally helped to fuel the decline and the June contract ended down 12.1 cents at $5.568.

Sources agreed that the market was ushered lower following the release Monday of a key industry weather report. According to Citigroup Global Markets meteorologists Jon Davis and Mark Russo, summer temperatures across the United States are likely to be normal to warmer than normal, but there is not likely to be an unusually hot summer like last year (see full story Daily GPI, May 6).

However, not everyone was so bearish following the report. For Tim Evans of New York-based IFR Pegasus, the weather report is open to interpretation. “While the short-term reaction to this forecast is understandably sparking some profit-taking, we do not find the forecast itself all that remarkable,” he wrote in a note to customers Tuesday. “Last year’s weather ranked within the hottest seven years of the past 108 on record, so it would be a bold forecast indeed that called for an even hotter season.” Evans goes on to point out that the area forecasted to see some of the largest deviation from normal is the Southeast, a region plump with new gas-fired generation as well as some key nuclear outages.

Technicals were not totally absent from yesterday’s trade. After failing at the 75% Fibonacci resistance at $5.72 Monday, the market set the tone when it was unable to even test that level Tuesday. On the downside, Tuesday’s selloff also failed to extend down to the $5.45-52 chart gap notched by the June contract on Monday, April, 28, leaving that as a downside objective Wednesday. Should the market break lower, a test of the 38.2% Fibonacci retracement is possible.

Looking ahead to fresh storage data due out Thursday, expectations are still calling for a 80-96 Bcf refill, which if realized would easily exceed the year ago analog of 39 Bcf as well as a 62 Bcf five-year average.

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