Led by follow-through buying, record-setting heat out West, anda constructive over-the-counter market, natural gas futures eruptedhigher at the open yesterday as buyers propelled the market to newthree and a half year highs. The rally was short-lived, however,and after posting a $3.985 high during the first hour of trading,the June contract tumbled lower under a wave of selling pressure tofinish at $3.747, down 7.8 cents on the day. Estimated volume wasextremely heavy, with 134,429 contracts changing hands.

Traders agreed that even despite the bullish sentiment, themarket was a little overheated yesterday. “Everything was pointingto higher prices. Cash prices were strong because of the heat outwest. Weather forecasts were revised to call for warmer temps forthe holiday weekend and there was even talk circulating about atropical storm (Tropical Depression One-E in the Pacific Ocean)[Monday]. But even with all of that bullish news, the market didnot make the opening call.” a Houston trader said, referring toyesterday’s $3.94 open that fell short of the $3.99 trade seen inearly morning over-the-counter trading.

Another trader blamed yesterday’s see-saw price action on heavybuying that turned into selling after locals failed incite anoptions-related rally. “There are 21,000 July $4.00 calls that willneed to be covered with futures positions as July nears $4.00.There was a lot of buying earlier by speculators looking to pushprices through that level in an attempt to attract option-relatedbuying. When the market turned, they were forced to sell,” he said.

According to the National Weather Service, above normaltemperatures are expected over a large area comprisingapproximately the southern two-thirds of the lower 48 states. Belownormal temperatures will be confined to New England and thenorthern Great Lakes with the remainder of the country expected tosee normal readings, the NWS said.

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