For the sixth time in seven trading sessions, natural gas futures advanced higher yesterday amid technical bullishness, and as traders continued to grapple with the possibility that the year-on-year storage deficit—currently at 404 Bcf—will be difficult to trim this summer when gas is in high demand for electricity generation. The May contract led all months Tuesday, finishing 8.2 cents stronger at $5.559.

As expected Monday (see Daily GPI, April 10), traders were eager to add to recent advances yesterday, and had little trouble pressuring the market to its second straight higher open. However, just like Monday’s price action, the May contract yesterday was unable to continue higher, leaving the market to chop sideways throughout the session.

For Ira Hochman, a technician who consults several key local traders at Nymex, yesterday’s neutral day structure is a little disconcerting for bulls. “I am still a little long, but would not be surprised if this thing came off a little tomorrow morning before the [American Gas Association storage report].” If however, the market isable to add to Tuesday’s advances this morning, Hochman looks to sell into resistance up to the $5.74 area. A break above that level, which corresponds withthe March 28 high, would cause him to reverse back to the long side of the market.

A move that substantial may have to wait until after fresh storage data is released this afternoon. While the market’s frenetic activity tends to abate each Wednesday before the 2 p.m. (EDT) release, the market will be especially dormant today due to the uncertainty as to whether storage levels increased or decreased last week. Most analysts are calling for net withdrawal or injection of 10 Bcf or less, with a few looking for as much as a 30 Bcf refill. Last year at this time the AGA announced a 2 Bcf injection.

Regardless of the data the AGA releases this afternoon, it is safe to say that next Wednesday’s storage report (covering this week’s storage activity) will not match the bullishness of the 25 Bcf withdrawn last year at the equivalent time. It is for that reason that New York-based IFR Pegasus believes the market could give back recent gains. “On the downside, a break of $5.43 would dampen the upward momentum, but there would still be some consolidation from $5.36 down to Friday’s $5.33 low that could still avert a more dramatic plunge,” the group wrote in its Pegasus NatGas Report Tuesday.

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