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Weather, Technicals Tip Scales in Bulls' Favor

Weather, Technicals Tip Scales in Bulls' Favor

Activity in the natural gas pit at NYMEX has been uncharacteristically quiet recently with low volatility and sub-5 cent trading ranges the rule rather than the exception. In fact, the only real excitement in the past couple of weeks came Monday when the July contract bounced 3 cents in a late rally. But even that was quickly dismissed by many traders who considered it nothing more than a freak, expiration-day anomaly in an otherwise subdued market. Enter the August contract, which wasted little time yesterday in moving dramatically higher in a rush of speculative and commercial buying. The newly crowned prompt month finished up 7.6 cents for the session at $2.400.

A complimentary technical picture and weather outlook is how one trader described the rationale for the price advance. "We have had bullish weather and bullish technicals, but we haven't had them at the same time," he said.

In its most recent six to 10-day forecast the National Weather Service calls for above and much above normal temperatures over a large swath of the center of the country. Private forecasts corroborated the NWS outlook, sources said.

But fundamentals were not the sole factor impacting prices. A broker said local buying ahead of the 40-day moving average was also responsible. Locals, many of whom trade their own book and thrive off market volatility, will often push the market in a pre-emptive strike toward one of the moving averages. The 40-day moving average for August is currently $2.343.

Looking ahead, the first potential wet blanket for this market could come today in the form of the weekly storage figures released by the American Gas Association. Sources feel that an expected net injection of 80-90 Bcf will produce bearish overtones when compared with last year's 72 refill.

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