Tuesday’s rebound in natural gas futures prices continued Wednesday morning until running into resistance and reversing lower. The August contract reached a high of $6.840 before settling on the day’s low of $6.600, down 9.9 cents from Tuesday’s close.

Traders are saying that the market’s next move is likely tied to the weather picture for the rest of the summer. If prolonged heat were to stick around or tropical storm activity were to develop and threaten the Gulf of Mexico, the bulls would be comfortably back in the driver’s seat.

According to the Frontier Weather six- to 10-day outlook for July 16-20, below normal temperatures are expected in parts of the Pacific Northwest, while above normal temps will be recorded from the Rockies to the Northeast. Normal readings are expected across the South. The 11- to 15-day forecast covering July 21-25 predicts temperatures will continue to average above normal from the Rockies to the Northeast, with normal readings expected along the West Coast and from New Mexico to the Southeast.

Citigroup analyst Tim Evans said it appears that recent hot weather in a number of regions is finally showing up in futures prices. “The natural gas market has drawn some follow-through buying, with traders showing more respect for the ongoing warmer-than-normal temperatures,” he said. “The 11- to 15-day forecast, while it shows only normal readings in the South where heat would boost demand most, offers above-normal temperatures across the Midwest and Northeast where there is certainly plenty of population. We remain concerned that demand may fall short of matching last year, but do see enough cooling demand to allow a further recovery in price. Speculative traders under time pressure to exit August futures positions by the end of the month may also be looking to buy.”

Taking a look at Thursday’s natural gas storage report for the week ended July 6, Evans said he is eyeing an 85 Bcf injection, noting that the Independence Day holiday last week would aid in the higher refill due to reduced industrial gas demand. The number revealed by the Energy Information Administration will be compared to last year’s hefty 86 Bcf build and the five-year average injection of 96 Bcf.

Jay Levine, a broker with enerjay LLC, said while he is expecting an injection of 78 Bcf, he is well aware that most predictions are in the 90s, with some estimates breaking the 100 Bcf injection mark. Regardless of the storage situation, Levine said he thinks the energy futures complex is still a bull market with natural gas still “extremely oversold” and crude oil “extremely overbought.”

Levine added that Tuesday’s gains were small in comparison to the recent drops. “Not even the recent heat wave which has gripped much of the country is enough to warrant sustainable gains — unless there’s further sustainable heat — and there’s still ample time for hurricane season to hit (literally and figuratively)…At the same time crude is showing remarkable resiliency considering it’s been making new highs daily — and charts still look aggressively higher, notwithstanding the aforementioned and the technical picture — and natural gas has largely been following crude down but not up.”

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