June natural gas futures suffered only minor bumps and bruises Wednesday as concerns over European debt levels dragged stock markets and petroleum markets down further.
Traders lamented the narrowly defined trading range, and admitted it was going to take some kind of weather event to move the market (presumably higher). June natural gas futures fell 2.2 cents to $3.991 and July shed 2.6 cents to $4.107. June crude oil posted a $2.77 loss to $79.97 and the Dow Jones Industrial Average fell 59 points to 10,866.
“We are separated from all the weakness in the oil and equity markets and are just in a very trendless market,” said a New York floor trader. “The market is trading on light volume and is very directionless before Thursday’s [inventory] number. We have been stuck in this range since we broke through $4.10 on the downside and got all the way down to the $3.80s, and now we are in the low $3.90s to $4.05. Until the market shows you something in either direction you can’t be convinced the market is moving one way or the other.”
He added that he was looking for a “breakout of either the $4.10 to $4.12 area on the upside or below $3.82 if it’s going to make it to $3.50. We are absent weather and everyone has a bearish feeling about storage, but until there is some news we are not going to break out either way.”
Thursday’s reported injection is likely to put April’s injection well beyond any April injection for the last 10 years. The 10:30 a.m. EDT report by the Energy Information Administration (EIA) is expected to show a build of 80 Bcf, according to the average of 26 analysts polled by Reuters. Both Dow Jones and Ritterbusch and Associates are expecting an increase of 79 Bcf. An 80 Bcf build would put April injections at 354 Bcf, the highest April injection on record, and far above the highest injection over the last 10 years when 253 Bcf was injected in April 2006.
The New York trader speculated that a 10 Bcf divergence from the anticipated 80 Bcf build might be enough to break the market out of its range, but “we haven’t had that much of a differential in a while. What we really need is a weather event; either really warm weather by the end of May or signs of a hurricane. We are waiting for something to push us one way or the other, but traders feel we are in a gradual bear market. Everything fundamental tells me we should go lower, but the market is short as it is and that makes it difficult for this market to go down. We need more sellers.”
U.S. energy demand became somewhat clearer Wednesday morning when the EIA released petroleum inventory figures. The report showed a build in crude oil of 2.95 million bbl, somewhat higher than the 1 million bbl gain predicted in an earlier Bloomberg survey. Tuesday evening the industry-funded American Petroleum Institute reported that for the week ended April 30 crude stocks rose by 2.95 million bbl, gasoline was higher by 1.46 million bbl, and distillate supplies rose 1.37 million bbl. The EIA reported a build of 1.257 million bbl of gasoline and an increase of 573,000 bbl of distillate fuels.
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