Spot natural gas for delivery Wednesday moved little in Tuesday’s trading as moderate strength in the Gulf, Midcontinent, and Midwest was mostly able to offset weakness at eastern points. The NGI National Spot Gas Average rose 2 cents to $1.90.

Spot prices at most locations held their own in spite of government demand data showing below seasonal requirements. Futures managed to grind higher although traders see the market confined to a range and in need of higher or lower prices to generate trading interest. At the close June had risen 6.0 cents to $2.158 and July was up 5.6 cents to $2.285. June crude oil gained $1.22 to $44.66/bbl.

“I think we are seeing more short covering,” said a New York floor trader. “Look for a push through $2.173 to clean some more of the shorts out and a move up to $2.23. That’s a short term play.”

Natural gas market bulls received minor support on Tuesday thanks to a somewhat bullish Energy Information Administration Short-Term Energy Outlook (see related story). For the first time in nearly a year, the government agency actually increased its 2016 natural gas price projection. The EIA said it expects that Henry Hub prices will average $2.25/MMBtu this year, up 7 cents from the agency’s previous prognostication.

Others see a market unable to break out of a trading range. “We have a conflict brewing here between bulls and bears and the market has not been able to declare itself,” said Al Levine, CEO of Powerhouse LLC, a Washington D.C.-based trading and risk management firm.

“At the same time production is falling there are efficiencies that don’t materially prevent new supplies from coming into the system. We haven’t fully comprehended what shale [gas] is doing.

“There are really not any factors to move this market around, and since March we have traded in a relatively tight range between $1.90 and $2.20. This is the conflict we have, and I don’t think it will be resolved until we break under $1.90 or over $2.25 to $2.30. Those are my trading points.

“I consider this to be a market that will be well supplied for quite some time. The carry is showing that as June became spot, it moved down rather than advancing in any way. The carry is a serious concern.

“Buyers are reluctant, but at the same time we have not been able to pierce the downside. A move to $2.25 to $2.30 would get commercial longs’ attention. There’s a point in January on the chart where you got as high as $2.495, and if we settled above $2.50, I think that would prompt some long hedges,” he said.

Observers keeping a close eye on supply and demand see the market in a holding pattern until new storage data on Thursday. “[S]upply and offtake are relatively balanced at current price levels with the weather factor providing limited guidance,” said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients. “This market could further mark time for a few more days until Thursday’s weekly storage report is released. Although some contraction in the storage surplus against 5 year averages of at least 10 Bcf would appear likely, we feel that such a development has been priced in.

“In other words, an injection of less than 60 Bcf will likely be required in order to boost value back toward last week’s highs. We are maintaining a short term bearish view for now as we still anticipate about a 15-cent price decline from today’s close. But, we have afforded this trade much time and patience and we feel that our downside target of $1.95 per nearby futures will need to be achieved by week’s end if it is to develop.”

Analysts following sentiment indicators point to natural gas as still having an overwhelming presence of shorts. “As as of last week the market with the most bearish sentiment extreme is still Natgas,” said Walter Zimmermann, vice president at United ICAP. “It is not 11% bulls anymore [March], but it is still a market super-saturated with shorts – more so than any other market.

“The message of a historic, bearish sentiment extreme is that the worst case has already been discounted. And if anything less bad than the worst shows up, prices will rally,” he said in a weekly note to clients.

Weather forecasters suggest some cooling is on the way, but signs of impending warmth are also in the data. “Very slight demand increases are estimated today, but the demand levels are still relatively low seasonally,” said Commodity Weather Group in its morning report. “Overall changes in the first ten days of the forecast period edges to the cooler side again today.

“We continue to track an impressive late-season cool push into the Midcontinent this coming weekend and continuing into the early half of next week. Some cooler changes also occur in the Western states in the first ten days as well as into the early 11-15 day for the Southwest. Otherwise, the models are starting to rebuild warmer weather for the 11-15 day across the Midwest, South, and even East,” said Matt Rogers, president of the firm.

In physical market trading major hubs were mixed as the National Weather Service (NWS) forecast a below normal level of both heating degree days and cooling degree days. For the week ended May 14 NWS predicted New England would see a total of just 57 combined degree days (DD), or 17 below normal and the Mid-Atlantic would enjoy just 49 DDs or 11 below its seasonal tally. The greater Midwest from Ohio to Wisconsin was expected to experience 47 DD or 24 below normal.

Gas for Wednesday delivery at Transco Zone 6 in New York fell 11 cents to $1.64 but deliveries to the Henry Hub added 7 cents to $2.04. At the Chicago Citygate next-day deliveries added 6 cents to $2.02 and gas at Opal changed hands flat at $1.90. Parcels at the PG&E Citygate gained a nickel to $2.17.