Backing away from the psychological $6 mark, August natural gas futures hit a low of $5.77 in morning trading before making its way back up to settle at $5.818, down 6.9 cents on the day.

In addition to a rapidly refilling storage situation, natural gas futures this week will also have to digest the recent bearish news of moderating temperature forecasts for some areas of the country, offset by reports of tropical storm activity in the Atlantic.

Pointing out that natural gas spent last Wednesday through Friday consolidating in the $5.80-6.00 area, GSC Energy’s Craig Coberly said Monday morning that probabilities are “high” that this consolidation is just about complete. Taking this into account, he said the outlook for the next significant price move is for the decline to resume.

Coberly said that closing below $5.84 any day this week would be “good evidence” that the decline toward the $5.45-5.50 support has started. The fact that this level has been tripped the first day of the week could be telling. For “near certainty” evidence of a continued decline, Coberly added that he would watch for a trade below $5.76.

“Closing above $6.04 will make the short-term outlook for a decline to $5.45-5.50 very questionable; however, it would most likely not affect the intermediate term bearish outlook,” he said. “To totally invalidate my bearish outlook, gas would have to trade above $6.44.”

Tim Evans of IFR Energy Services said that although Monday’s market rebounded from a minor new low, the natural gas market still looks heavy from just about every angle. “Its price performance has been quite weak relative to the petroleum complex and that hardly inspires confidence,” he said.

Noting that storage has been filling at an above average rate, Evans said he expects to see 75-85 Bcf in net injections, resulting in a bearish comparison to the 69 Bcf five-year average refill.

“Temperatures look a bit warmer this week on an overall basis, but there is also more nuclear plant capacity coming back to offset some of the added air conditioning demand,” he said. “Looking ahead, the temperature outlook still has cool temperatures in the Southeast to offset heat elsewhere.”

Forecaster and business solutions provider WSI Corp. said in its newly released August-October forecast that while a majority of the East Coast looks like it will be warmer than normal, some areas of the country will likely be out of the woods as far as heat is concerned (see related story).

On the tropical storm watch, the National Hurricane Center (NHC) is currently tracking a tropical wave in the Caribbean. “Squalls on the leading edge of a tropical wave are approaching the Southern Windward Islands,” said NHC forecaster James L. Franklin. “As these squalls move through the Islands [Monday] afternoon and evening they will likely be accompanied by briefly heavy rains and wind gusts to near tropical storm force. This system has some potential to develop into a tropical depression over the next day or so.”

While taking note of the activity, Evans said it is too soon to bet on how much the tropical wave may develop or where it is headed.

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