Natural gas futures continued lower in an abbreviatedpre-holiday trading session Friday, adding to losses achievedWednesday and Thursday and stifling the hopes of bulls who werelooking for short-covering buying into the long weekend. The Augustcontract finished down 2.2 cents on the day at $2.287, 13.3 centsless than Wednesday’s high price. Estimated volume was an extremelymodest 28,784.

With little to comment about in Friday’s session, traders turnedtheir attention to this week’s price outlook. Most feel weatherwill be the largest single determinant of the market’s pricedirection in July. If temperatures continue tracking above normal,prices will stay up, but a return to normal or below normalreadings could sink the market, sources agreed. Near triple-digitheat predicted in parts of the country over the holiday weekendforced many utility buyers into the cash market Friday. As aresult, cash prices slipped very little from Bidweek levels.

But relief is on the way, says Brad Nesiba of Omaha-basedStrategic Weather Services. While admitting that the holidayweekend and the beginning of this week will be a scorcher for muchof the country, he looks for temperatures, at least in the easternhalf of the nation, to start to moderate Wednesday and Thursday.”Depending on how the [low pressure] trough sets up, we could seebelow-normal temperatures from the Northeast into the Great Lakesand Midwest by this week. The West, however, will stay hot,” Nesibasaid. Looking further into the crystal ball at the medium range11-15 day forecast, he predicts more of the same with highprecipitation in the Southeast expected to hold temperatures therein check. “Texas will continue to be spilt. “Western Texas willstay warm while eastern sections will be more mild,” he concluded.

But don’t sell the farm just yet, countered a Gulf Coast traderwho is weary of markets coming off long holiday weekends. “Themarket will need to sort through a number of pieces of informationTuesday morning. Many traders will have experienced hot weatherover the weekend and that could lend some psychological support toprices. One the other hand, the forecasts will show moderatingtemperatures into [this] weekend.” On balance, he remains bearishin the short term and looks for prices to continue into the teens.”Nuclear utilization is at a five-year high at 91.4% and there aremore units coming back up [this past] weekend. If we get moderatingtemperatures as predicted, there will be a lot of excess gas on themarket,” he reasoned.

One fresh piece of information traders will have to digestTuesday morning is the bi-weekly Commitments of Traders reportreleased Friday afternoon by the Commodity Futures TradingCommission. Released after the close of the abbreviated Fridaytrading session, the CFTC reported non-commercial traders werestill net-long over 40,000 in open interest. That figure is downfrom the 51,000 level of two weeks ago, but up from 34,000 lastweek. Does that mean the speculators are ready to liquidate theirpositions? Not necessarily, says a Houston risk manager.”Neutralizing their positions, maybe. They rolled out of July intoAugust since the last report and it’s not an exact science. In theprocess, they got a little less long. Now they have the choice ofrebuilding or continuing to sell off,” he said

Technically speaking, Tim Evans of New York-based ThompsonGlobal Markets believes the market is in a pivotal spot. A moveback through $2.35-36 would earn the August contract another try atresistance at $2.42, while support at $2.25-265 stands to limitfurther declines, he said.

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