Despite the sharp change in market direction the past twotrading days, with prices falling as much as 12 cents at somepoints Monday, there was no consensus on whether this is thebeginning of a lengthy slide or just a breather before anothersurge upward.

The only areas to escape falling cash prices yesterday were theRockies and California, which were bolstered by a scheduledmaintenance at the Opal hub, where 100 MMBtu/d was removed from themarket until Thursday. Malin traded flat to Friday and San Juan(non-Bondad) registered a gain to about $2.20.

As expected, cooler weather in the Midwest, Northeast and GulfCoast was cited as the main reason for the price drops. TheNortheast lost the most, as Transco Zone 6 fell to the mid $2.80safter reaching $3.15 last Thursday. Traders said activity was lightand Canadian activity was virtually non-existent thanks toyesterday’s Civic Holiday. Michigan citygate markets were extremelyhard to find, causing one Houston marketer to speculate that thelong Canadian holiday spurred buyers to pick up Dawn suppliesFriday for four days rather than three.

One Midwest trader doesn’t see the general price declinecontinuing. “I don’t see cash going away. During the last run-up,we saw over 50 cents tacked on to prices. That’s a pretty goodmove. Now, it’s cooled down, but I don’t know anybody who isturning off their air conditioners because the temperature fellfrom 100 to 94 degrees. I think it is preparing for another run.There has to be some settling down before that can happen, and thissmall cool-down provided the perfect opportunity.” Supporting histheory is the six- to 10-day forecast, which calls for much of theNortheast and Midwest to return to above-normal temperatures nextweek.

A Gulf Coast trader, however, is forecasting more declines tocome. He quoted Henry Hub prices trading in the low $2.50s. “Idon’t think the strength the market gathered early last week can besustained,” he said. “With relaxing generation loads, there isnothing pushing prices up. I think it could go down another 20cents before finding any reason to go up 5 cents.”

One bearish source said he is looking for temperatures tomoderate soon, and without the electric generation demand, more gaswill be put into the ground. “The only wild card,” he said,”remains hurricanes, but there is nothing on the horizon yet.”August is the first peak month for the hurricane season, accordingto the National Oceanic and Atmospheric Administration. Whileexpectations for an above-normal amount of powerful storms havegone unfulfilled so far, they are not far from traders’ thoughts.”I’m looking for weak prices until mid-August, but I have a gutfeeling that a hurricane or two will cause some spikes after that,”one Gulf Coast source said.

While bears think hurricanes are needed to lift prices, bullsare pointing to this week’s American Gas Association storage reportas a rallying point. “This Wednesday is the key,” one trader said.”Its no secret how hot its been this past week, and a lot of gaswas used to keep buildings cool.” He estimated this week’s reportwould resemble last week’s 41 Bcf injection and have a similarlybullish impact on the market.

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