Natural gas futures traded slightly lower Tuesday, as traders were wary of pushing prices higher without clear signs of warmer weather on the horizon.
Natural gas for June delivery recently traded down 6.1 cents, or 1.5%, to $4.257 a million British thermal units on the New York Mercantile Exchange.
The contract gave back much of Monday's gains, as market participants await a clearer picture of weather-driven demand this summer. Forecasts continue to call for below-normal temperatures across most of the next five days -- little-changed from Monday -- followed by a return to above-normal temperatures in the central and eastern U.S., according to Tradition Energy.
"We are going to see a return of some hot weather, but not strongly enough to generate elevated cooling use, so we're stuck in the middle of this range," said Gene McGillian, broker at the Stamford, Conn., firm.
Natural gas futures have wobbled between $4 and $4.35 a million British thermal units since May 5, when a sell-off across the commodities market sent the contract tumbling from highs above $4.70. Since then, the market has seen an exodus of speculative traders, keeping prices under pressure, McGillian said.
"The market tried to rally three weeks ago and we got above $4.70, but it looked like we got some headwinds," he said.
Natural gas futures advanced on Monday on follow-through buying following a report last week showing a drop in the weekly gas drilling rig count.
Price gains, however, are unlikely to hold without additional signs of weather-related demand. Traders will also be awaiting further cues from Thursday's report on U.S. gas inventories, which stand at 2% below the five-year average and 12% under 2010 levels.
Supplies, however, are expected to grow strongly in the coming weeks. The U.S. Energy Information Administration said last week it expects working gas inventories to build "strongly" during summer and approach record highs in the second half of 2011.
"With weather-related demand representing a non-event for a few more weeks, we still see sideways trade into early June," said Jim Ritterbusch, head of the trading advisory firm Ritterbusch & Associates in Galena, Ill.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.21/MMBtu, according to IntercontinentalExchange, down a penny from Monday's average. Natural gas for Tuesday delivery at Transcontinental Zone 6 in New York traded at $4.55/MMBtu, up 7 cents from Monday.