Sparked by roaring crude prices, shaky fundamentals and summer heat and storm uncertainty, August natural gas futures jumped 15.5 cents on Monday to close at $13.353/MMBtu, a new high close for the up move.

Both natural gas and crude futures roared higher during the Globex electronic early morning session with August natural gas reaching a high of $13.448/MMBtu and August crude reaching a high of $143.67/bbl. However, during the regular session, both contracts let out a little steam, with crude faltering a lot more than gas. Front-month crude ended up dropping 21 cents from Friday’s close to $140/bbl.

“The end of Monday’s regular session was a little bit of a surprise. Crude futures began to break and natural gas began to follow suit before holding up. I think there is no doubt that the bull market move in crude is still going…and I don’t think it is over in natural gas either, from a technical or fundamental perspective,” said Steve Blair, a broker with Rafferty Technical Research in New York. “We are still below both year-ago and five-year average storage levels, and at this point all we have ahead of us is hurricane season and the summer heat. The heat has not been that bad as of yet, but we are just starting July. We have been in a very sharp upwards price channel for some time now. Until that is broken, we are probably going to continue to see some upward movement, but it will likely be a back and forth action where we buy the bottom of the channel and sell the top.”

Reflecting on the $15.780 all-time record natural gas futures front-month high from back on Dec. 13, 2005, Blair noted that the record was set following the vicious storm season where Hurricanes Katrina, Rita and Wilma battered the Gulf of Mexico infrastructure; he added that another visit to that price level would likely involve another serious storm. “I only think that $15.780 come into play if we have another hurricane,” he said. “I don’t think we could get there just because we are behind historical storage levels. From Monday’s close, that is a $2.427 move, so I can’t really see that coming about without a good storm getting into the Gulf.”

Citi Futures Perspective analyst Tim Evans noted that natural gas futures continue to feed of crude’s price strength. “The natural gas market has also run to new highs in early trade today, with warmer-than-normal temperatures now forecast through mid-July seen boosting airconditioning demand to an extent that will continue to limit storage injections,” he said. “The tropical wave activity in the Atlantic is not necessarily a direct concern, although it could be considered a reminder that similar swirls a month from now could translate into a series of tropical storms or hurricanes. Higher oil prices also continue to support the sentiment for higher natural gas values.”

Looking at the near-term forecasts, Evans pointed out that Frontier Weather’s six- to 10-day outlook for July 5-9 calls for above-normal temperatures in most of the West and normal conditions for most of the East.

Taking a glance at the more immediate forecast, Eric Reese, a meteorologist with AccuWeather.com, said temperatures across the country will be greatly varied. “Looking ahead to Tuesday, a dip in the jet stream will create another day of unsettled weather in the Northeast,” he said. “High pressure over the center of the nation will create a nice day for the Plains. A ridge in the West will pull Southwest heat northward, bringing temperatures into the 90s in most places. The Gulf Coast, on the other hand, will stay stormy.”

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