June natural gas futures on Tuesday wavered on price direction in early trading, but finally resolved to trade somewhat higher. After notching a low of $6.600 just after 11 a.m. EDT, the prompt month inched upward in the afternoon to record a high of $6.870 before closing at $6.746, up 5.1 cents on the day.

The petroleum complex continued to prop up natural gas futures. Harnessing Monday’s upward momentum, June crude climbed another 91 cents on Tuesday to settle at $74.61/bbl.

“While natural gas is definitely being influenced by oil, we are starting to develop a good base of heat in the Southwest, and I think we are beginning to see some reasonable demand coming in,” said a Washington, DC-based broker. “We are still definitely concerned by the fact that natural gas is so undervalued relative to oil. I think that is definitely holding natural gas up here. The liquids keep moving higher. You can’t shoot them with a gun.

“The natural gas market has come down to these lower levels with the $6.49 low basis-June from last Friday, so this $6.50 level at least for the moment seems to want to hold. There seems to be pretty good support down there.”

The broker said the situation with crude is not so much availability. “It is more the concern and fear over what is going on in Iran and the reality that there is no obvious effort or progress in negotiations,” he said. “This fear will continue to hold the market up, even though it probably couldn’t justify these price levels based on fundamentals.”

Other natural gas traders also see oil markets as the primary short-term price driver. “Considering we are at that time of the year when it’s not too hot and not too cold, and the gas market trades on storage and a macro view, the gas market reacted to the same news affecting the energy complex,” said Mike DeVooght, president of DEVO Capital Management, a Colorado trading and consulting firm.

He suggests that end users stand aside, and that producers continue to hold a short position of 30% to 50% of winter production established earlier at $13.95.

Geopolitical concerns continue to rattle energy traders. MarketWatch reported that Iran’s deputy oil minister M.H. Nejad Hosseinian told a news conference in New Delhi, India that oil prices will spike to $100 a barrel this winter because supply cannot be increased to meet higher demand. In addition, diplomats from the five permanent members of the United Nations Security Council, France, the United Kingdom, the U.S., Russia and China as well as a representative of Germany were to meet in Paris Tuesday to discuss the council’s next step in its effort to pressure Tehran into halting uranium enrichment.

Top traders wonder how much pull the oil markets can have on natural gas. “We are not ruling out a renewed decoupling from the petroleum in view of exceptionally bearish fundamentals and the fact that the gas market is not subject to geopolitical considerations or the pull of product prices as is the case in the crude oil,” said Jim Ritterbusch of Ritterbusch and Associates. He also suggested that the investment capital currently available to enter the long side of the energy spectrum is not interested in the natural gas market

Market bears continue to point to weather and storage as factors expected to drive prices lower. Currently, working gas inventories stand at 1,851 Bcf and are poised to end April at the highest level since April 1991 when inventories reached a plump 2,037 Bcf.

Weather forecasts are also in the bears’ favor. The National Weather Service (NWS) reported that for the week ending May 6, below normal accumulations of heating degree days (HDD) are expected. The Mid-Atlantic states of New York, New Jersey and Pennsylvania are forecast to receive 60 HDD, or 15 below normal and the industrialized states of Ohio, Indiana, Michigan, Illinois and Wisconsin are expected to endure 60 HDD as well, or 19 below normal. Cooling requirements are not supportive of much natural gas demand either. The NWS forecasts no accumulations of cooling degree days (CDD) for either of the above sections of the country; Texas, however is forecast to roast under 74 CDD, 30 more than normal, and Florida is expected to receive 66 CDD, or three more than normal.

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