Still trying to sort out the market’s direction following August futures’ 38.5-cent explosion higher last Thursday, the front-month contract on Monday scouted lower values in the morning before rebounding into the afternoon. At the end of Monday’s regular session, the result was similar to Friday’s noncommittal tenth-of-a-cent gain as August natural gas added two pennies to close at $3.689.

After notching a low of $3.516 just before 11 a.m. EDT, the prompt-month contract rebounded in the afternoon to a high of $3.734 just after 2 p.m. EDT before slipping a few cents to close the regular session.

Over the weekend it had appeared that bullish traders would find even more support from a strengthening tropical wave east of the Caribbean. While the system appeared to be getting its act together as recently as Sunday, the forecast had changed by the time Monday’s regular trading session rolled around.

“Natural gas traders are watching low-pressure system 97L, just approaching the Windward Islands off the Caribbean,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “The system was named by the National Hurricane Center on Friday afternoon and it became somewhat more organized by Sunday, but has weakened a bit from that level. The system faces some adverse conditions over the next three to four days, so no imminent development is anticipated, but we do note that the forecast track could bring the system into the Gulf of Mexico next week. For this reason, it does bear monitoring.”

An AccuWeather.com meteorologist confirmed Monday that 97L was having trouble gaining strength. “The tropical wave east of the Lesser Antilles, which looked like it was getting better organized on Sunday, encountered stronger shearing winds Monday and is now beginning to become less organized,” said Brett Anderson, a senior meteorologist with AccuWeather.com. “The system will continue to track toward the west over the next couple of days, but reorganization is not expected at this time.”

Evans noted that the near-term temperature outlook is not that compelling, which could lead to near-average storage injections for the week ending July 31. “Without stronger direction from the weather forecasts, prices may be free to chop within their recent range,” he said.

Tom Saal and Ed Kennedy of Hencorp Becstone Futures in Miami see the market poised for a sale. “Look for a test of resistance at the $4.050 area. August natural gas is still in its trading range,” they said in a morning note to clients. They identify their $4.050 resistance point using Bollinger Bands, which are volatility-derived trading bands above and below the current market price.

Any bullish case notwithstanding, risk managers see physical market longs in need of price protection. “On a trading basis, we will continue to hold our producer collars,” said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. DeVooght currently advises trading accounts and end-users to stand aside, but producers are advised to hold an October $4.500-6. collar. In addition, a 12-month $5-8 collar is recommended beginning with the August contact for 35 cents.

Phil Flynn of Alaron reports that he was stopped out on his long position in August at a slight gain. He said he was long August from “approximately” $3.30 and was stopped out at $3.33 last week.

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