Historically, the end of the week has meant slackened gasdemand, but for the sixth consecutive Friday natural gas futureswere able to tack on gains. Revised weather forecasts for this weekand continued concerns over supply shortages gave rise to lightshort-covering throughout the trading session Friday. The Julycontract finished up 2.3 cents at $2.308 amid a moderate volume of64,873.

Contradictory weather forecasts last week had fundamentaltraders unsure of what to expect in terms of demand this week.While several private short run predictions, which utilize theEuropean forecasting model, call for generally below-normaltemperatures this week, the National Weather Service expectsabove-normal temperatures to be prevalent. The net impact on themarket? “People decided to avoid going into the weekend short andreassess their position on Monday,” says Ed Kennedy of Miami-basedPioneer Futures.

Despite the market’s positive direction Friday, Kennedy feelsthe market failed on two counts. “First, July settled for thesecond day in a row below its 40-day moving average. Second, cashprices dipped below first of month index for the first time thismonth.” Daily GPI’s first of month Henry Hub index was $2.22.Looking ahead, he feels July needs to clear the $2.35 level inorder for the bulls to regain control and that may not be possiblewithout an extended period of sustained demand. “Then we would seeexactly how tight the supply situation is,” he continued.

A sustained period of above-normal temperatures may not be inthe cards quite yet says Fred Gesser of Omaha-based StrategicWeather Services. Gesser looks for the weather to continue toseesaw for the next month as temperatures oscillate above and belownormal. His forecast, which is based on the coldest sea surfacetemperatures in the Eastern Pacific Ocean in 50 years, calls forthe Central U.S. to experience normal, above-normal, and much-abovenormal temperatures while the East Coast will see normal andbelow-normal readings.

Citing those cooler temperatures expected in the East, SusannahHardesty, of Indiana-based Energy Research & Trading, believesthat the market has seen the last of its spring highs. Hardestypredicts prices will continue lower into the expiration of the Julycontract before etching the first of its summer lows between July 5and 23 on a move by the August contract to the $1.80 and $2.00level.

What about the undeniably bullish storage report that failed tomove the market higher? Hardesty feels it proves the market is moreconcerned with the lack of potential demand rather than the lack ofpotential supply. “Storage owners are betting they will be able tomake up the difference later,” she said.

However, Cynthia Kase, of New Mexico-based Kase and Companyviews the move lower as just a correction amid the larger bullishtrend. “If the funds hit the market as sellers, the correctioncould run as deep as $2.155. But once that move is complete, Iexpect a renewed push back up to the $2.50 area or better,” Kasesaid.

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