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Forecast Warmth Not Enough For Bulls; July Called Unchanged

July natural gas is set to open unchanged Tuesday morning at $2.65 as traders note a tug-of-war between speculative sellers and market bulls saying all the unfavorable news is already in the market. Overnight oil markets rose.

Analysts aren't ascribing much significance to Monday's price movement. "Although this market managed to lift [Monday] following some fresh one-month lows overnight, we are reluctant to read too much into today's price action," said Jim Ritterbusch of Ritterbusch and Associates in closing comments.

"Shoulder period-type temperatures are still largely intact despite forecasts for a renewed warming trend later this week with extension out toward mid-month," he said. "However, deviations from normal don't appear sufficient to spur much buying interest and as a result, this market is obviously requiring lower price levels in order to encourage any commercial buying interest. For now, producers appear much more interested in protecting future output than users are in fixing future pricing. This has allowed the speculative community to re-enter the short side of the market with assertion as multi-week lows are posted.

"The $2.60 level should offer solid price support into Thursday's weekly EIA report. Short of a bullish surprise out of the data, we will look for nearby values to ratchet on down to about the $2.54 level by week's end. All in all, a bearish stance is still advised in quest of an eventual decline to the $2.50 area. But we will reiterate that fresh shorts should await price advances back to about $2.80 area before establishing new holdings in order to maintain a favorable risk-reward ratio."

Weather-wise Texas and points east are expected to see warmth next week. Commodity Weather Group in its morning report said, "Preliminary estimates [Tuesday] are for a very slight demand loss compared to yesterday due to cooler changes in the one- to five-day range. Otherwise, some slightly warmer changes are noted in Texas and the South as well as along the East Coast next week. On the Texas story, we are finally getting a drier spell to enable that area to recover toward more seasonal high temperatures. Houston is projected to be in at least the low 90s all next week with near-90 degree weather around Dallas as well. Warmth at times in the Midwest and East is expected to be quite weak and ineffective in producing significant cooling demand."

In overnight Globex trading July crude oil gained 60 cents to $60.80/bbl and July RBOB gasoline rose fractionally to $2.0453/gal.

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