Natural gas futures continued to test the upside Friday after support at $4 held earlier in the week. The July contract recorded a high of $4.399 before closing Friday’s regular session at $4.341, up 4.7 cents from Thursday’s finish and 23.5 cents higher than the previous week’s close.

While the market’s bearish fundamentals, such as high levels of storage gas and production, appear to have been largely ignored over the past few weeks, some market watchers believe the bullish fundamentals, like the start of hurricane season and the forecasts for a warm summer, are slipping through and making an impact.

“I’ve been telling a lot of clients this week that the natural gas futures market has clearly shown that the fundamentals…at least the bearish ones…are really of not much consequence,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Every time it has tried to get under $4, it’s bounced back up. That said, we’ve got the official start to the hurricane season on Tuesday, which typically causes some sort of mini-rally. This could be enhanced by the fact that all of the major hurricane forecasters are looking for a pretty rough Atlantic hurricane season. Summer generation load is also on people’s minds.”

Blair added that these bullish fundamentals likely weighed even more heavily due to the three-day holiday weekend. “With these type of things in the back of people’s heads, I don’t think anyone really wanted to be too short headed into the long weekend,” he said. “From a technical perspective, we find ourselves at a critical juncture. A close above $4.330 — which we accomplished Friday — is the first sign of a potential breakout to the upside. A close above the $4.410-4.420 area would complete the signal that this market is moving clearly into a bull pattern.”

Traders looking for a boost in natural gas prices from underlying strength in the economy were on a roll last week. On Monday April existing home sales data came in stronger than expected and on Tuesday The Conference Board reported higher-than-expected May consumer confidence data. Wednesday the bulls received a double whammy of good news in the form of April Commerce Department figures showing durable goods orders had been better than anticipated as well as supportive April new home sales figures. Thursday’s report on first quarter gross domestic product (GDP) was a small shortfall with actual figures slightly less than market expectations but showing economic growth nonetheless.

Friday’s report on April personal income from the Commerce Department couldn’t quite complete the streak. March personal income had risen 0.3% and expectations were for a gain of 0.5% for April. The 8:30 a.m. EDT report showed that April personal income rose 0.4%.

Analysts aren’t so sure the positive economic reports will translate into higher industrial demand. “We are also proceeding on the assumption that some of the price strength of the past few sessions is based on an increasingly favorable economic outlook that garnered further support from yesterday’s GDP data,” said Jim Ritterbusch of Ritterbusch and Associates.

In his view the “connection between favorable economic data and ongoing natural gas industrial demand strength appears loose based on recent storage builds that exceeded expectations. To the extent that this market appears to be focusing more intently on the economic data, [Friday] morning’s personal income report as well as the consumer sentiment figures could have some price impact. However, the improving U.S. economy is not showing as much downward pressure on the weekly supply injections as we had anticipated,” he said.

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