Fueled by strength in the overnight Access trading session,natural gas prices moved higher Friday morning as traders coveredshort positions acquired during the market’s 30-cent move lowerlast week. However, after peaking at $3.93 in the first hour oftrading, the bears went back to work and were ultimately successfulpushing the market lower on the day. The August contract finishedthe session down 2.6 cents at $3.834 in a session that saw anextremely-light, 48,413 contracts change hands.

Despite the late sell-off, bulls remain optimistic on thegrounds that sellers were unable to retest channel support at $3.80Friday. “We saw good buying between $3.79 and $3.81 Thursday,” acash trader said. “There seems to be a segment of the market with astrong incentive to keep prices from falling any lower.”

However, keeping prices above the key technical support at $3.80might be easier said than done. Bulls will not only need to getpast unfavorable year-on-year storage figures, but also continuedmild weather in the eastern third of the country.

According to Brad Nesiba of Pennsylvania-based Planalytics(formerly Omaha-based Strategic Weather Services), the existence ofa prominent Hudson Bay vortex, which has been responsible for thecool temperatures in the Northeast and Midwest and hot temperaturesout West, is likely to continue through at least the first week ofAugust. “We should continue to see a ridge of high pressure overthe Central Plains including Dallas and Oklahoma City, whiletroughing will keep temperatures below normal in the Northeastcorridor,” he said.

Ironically, Nesiba admits the only chance for a change in thecurrent weather pattern is from a disturbance in the tropics, whichtends to bring about a spike to the price of natural gas anyway.However, he regards the chance of a tropical disturbance betweennow and the end of the first week of August as low.

“[This] week will be bad, but [next] week is the scary one,” aHouston-based trader said of the year-on-year storage comparisonsfor the next several weeks. “The East consuming region, on its own,will likely surpass [the injections] for the entire U.S. from ayear ago,” he continued. He may have a point, because while theentire U.S. was able to inject 41 Bcf, 26 Bcf, and 45 Bcf for thenext three weeks last year, the East consuming region alone has putaway an average of 53 Bcf a week since the beginning of June.

On closer inspection, however, the injection figures for theEast over the past seven weeks may tell us something about thepsyche of storage injectors in that region, the trader continued.

“Utilities seem to have a bogey number for the amount of gasthey are putting into the ground, regardless of the heat. Iftemperatures pick up, they buy more gas in the swing market; if theweather moderates, they sell more. Just so long as they stuff intothe ground a pre-determined amount,” he speculated.

The numbers speak for themselves. Aside from the Fourth of Julyholiday week when 63 Bcf was added to storage in the East, allother weekly injection rates since May have fallen between 48 and53 Bcf.

Looking ahead, many traders believe the market will continuelower this week and break below support at $3.80. For SusannahHardesty of Indiana-based Energy Research and Trading, this movelower will represent the first bottom of the summer low, and willoccur by Aug. 4, on a move by the prompt month down to the $3.20-40area. She also points out that when the prompt month makes itsdaily high and low during the first and last hour of tradingrespectively (as it did Friday), the prompt month historically hasa 92% probability of moving lower the next trading session.

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