June natural gas futures eased slightly in an apparently lackluster trading session, but those watching the more deferred contracts swoon sensed a significant change in the market that may lead to lower prices.

June futures fell 2.7 cents to $4.312 and July skidded 3.1 cents to $4.409. Oil and equity markets tumbled on concerns of Europe’s ability to come to terms with its debt issues. June crude oil fell $2.79 to $71.61/bbl and the Dow Jones Industrial Average dropped 162 points to 10,620.

In spite of recent strength traders aren’t receptive to any kind of sustained market advance. “I’m just not there [bullish] yet,” said Ed Kennedy, vice president at Hencorp Futures in Miami. He noted that “we are in for a very active hurricane season with the Gulf of Mexico in play, but we’ll see what happens in June. Other than that there is not much going on.”

In spite of the modest 2.7-cent loss posted by June futures, other traders see significant activity in the more deferred contracts and spreads from front-month contracts to ones that are further down the road. “There’s a lot of pain in the back of the board and front to back spreads. Calendar 2011 is down 13 cents,” said a New York floor trader.

The change in the front-to-back spreads could augur significant changes for the June and July contracts. One argument for the resiliency of the market was the lack of movement in the more deferred contracts. With the December and more distant contracts typically moving little when the front months soared or tumbled on near-term events, traders hypothesized that the market may be putting in a bottom. That argument took a beating in Friday’s activity.

“Theoretically the back of the board was holding up the front months, but the ‘pied piper’ has come to town and shaken things up a little bit. October-December has come in 7.5 cents, and July-December and September-December were active as well. There has been a lot of money changing hands the last couple of sessions and particularly [Friday]. It’s definitely significant,” the trader said.

Oilfield services firm Baker Hughes reported that for the week ended May 14 the number of rigs drilling for gas fell by 2 to 951. Last year at this time 728 rigs were drilling for gas. Rig counts and prices have fallen precipitously from highs reached in July of 2008 with rigs declining from a high of 1,606 and prices dropping from a high of $13.94. More recently rigs have rebounded from a low of 665 posted July 2009.

The change in front to back spreads notwithstanding some observers see Thursday’s 94 Bcf storage build as supportive. “Fundamentally-oriented traders are finding some support from yesterday’s lower-than-expected storage build,” said Jim Ritterbusch of Ritterbusch and Associates. He admitted that “reasons behind the smaller-than-expected injection are a bit obscure, [and] we are maintaining a trading concept that industrial demand may well be stronger than generally perceived. With this in mind, a plethora of economic releases today could have some significant influence on how this market finishes the week.”

One economic report that came in on the positive side of the trading ledger was the 8:30 a.m. EDT release of April retail sales figures by the Commerce Department. March sales increased by a whopping 1.6%, due mainly to a spike in automobile sales, but expectations were for an increase for April of 0.2%. The actual figure came in at 0.4%.

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