Prompt month natural gas prices have been stuck in a range for several months now, with the exception of a handful of days centered around the Tetco pipe explosion a couple months back, and the plunge around the expiration of the July contract last month. As the continuous prompt month chart shows, prices have generally been bound on the low side in the low 1.60s, and on the high side in the 1.90s.

The main issue in the market remains whether or not we will have storage containment this Fall. As such, the market is searching for something that will offer clarity regarding which way the scales may tip. To be sure, supply / demand balances have tightened compared to a couple of months ago, but not enough to settle the issue. Production has actually ticked back somewhat higher from its lows several weeks ago.

LNG volumes remain very low, though they, too, are off their lows.

Weather has been the main bullish item so far this summer, and was starting to look like it could be lobbying to be the deciding factor, though has lost some of its punch. We had been projecting the hottest July on record in terms of total demand (measured by Gas-Weighted Degree Days, or GWDDs), but recent cooler changes have knocked it down a couple of notches to 3rd hottest, behind July 2011 and July 2012.

Still, the pattern remains hot-leaning overall, with the entire country either near normal or hotter than normal.

So, here we are, still in search of a clear sense of direction, playing in the same prompt month range. We are gradually drawing closer to "decision time", however, so constant monitoring of both weather and the background fundamentals data will be critical in determining where prices ultimately go. Staying in the range all the way through the end of injection season seems like the least likely path. Either we see a clearer case for containment issues, and the range breaks to the downside decisively, or we avoid it, offering a breakout to the upside.