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Price Strength Waning, Analyst Says, Yet August Called 5 Cents Higher

August natural gas is set to open 5 cents higher Tuesday morning at $2.77 as traders mull heat indexes that are expected to be well into triple digits by mid-week. Overnight oil markets rose.

Analysts see upward price momentum as a difficult hurdle.

"This market has rotated back up toward yesterday's highs as the temperature factor remains tilted bullish," said Jim Ritterbusch of Ritterbusch and Associates in opening comments Tuesday. "Although there were no major changes in the overnight temperature views, the extreme heat that is expected to move into the Midcontinent region during the next few days will be boosting next-day cash values in the process of forcing a new wide inversion in the front switch ahead of an EIA [storage] report that could possibly offer some bullish surprise if last week's larger than expected injection receives an offset.

"But while the temperature views that are now stretching into the beginning of August still look price supportive, this market continues to experience difficulty in maintaining price strength given evolving bearish non-weather factors. As is the case in the petroleum, an apparent bottoming in the rig counts is conjuring up images of stronger production by next month than had previously been expected."

Weather forecasters call for only minimal relief from ongoing heat. Natgasweather.com in a noon update Monday said, "[T]he weather pattern from the middle of this week into next will become quite hot and uncomfortable. Until then, hot high pressure is dominating many regions of the country with widespread upper 80s to 100s, including into major Northeast cities.

"However, a weather system with showers and thunderstorms sweeping across the Great Lakes and Mid-Atlantic is bringing showers and minor cooling, which will ease Tuesday natgas demand slightly from today. Although hot upper high pressure will strengthen and expand to take ground mid-week with hot and humid temperatures combining to push the heat index to impressive values of 100-113 degrees F over large portions of the central U.S., focused around the Mississippi Valley."

In overnight Globex trading August crude oil gained 13 cents to $45.37/bbl and August RBOB gasoline rose fractionally to $1.3883/gal.

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