It appears that no matter how hard futures bulls try to punch through resistance at $8, they will continue to meet with failure until some other piece of bullish fundamental news -- whether it be summer heat or hurricanes -- is introduced into the equation. June natural gas futures recorded a $8.110 high Monday before retreating to close at $7.952, up 5.3 cents on the day.

Like all of the other recent breaches of $8, follow-through trading remained elusive as soon as June futures pushed higher. However, a number of industry insiders have noted over the past few weeks that when the prompt month finally punches higher, it will do so in exaggerated fashion.

"Somebody asked me Monday when we were trading near $8.050 whether this would be the time that we finally skyrocketed to higher prices," said Tim Evans, an analyst with Citigroup. "I responded that I am completely agnostic on this thing. Maybe we will, maybe we won't. At some stage the funds as a group are going to be covering shorts, which will launch futures to higher prices. As to whether they decide to defend this thing and knock it lower first is still unanswered. It is a question more of tactics than of fundamentals.

"Monday's session also asks whether the glass is half empty or half full," he added. "While we backed significantly off the day's highs to settle, we also finished a nickel higher than Friday's close, which is still positive. Was Monday a test run for what is about to happen? I don't know."

Evans noted that the near-term storage outlook continues to be marginally bearish with above-average storage injections, but the difference does not necessarily dictate price movement to the downside. "If marketers are not shocked by the extra 10 Bcf addition to storage a week, well, then the market can still rally from here," he said. "It comes down to when will the cooling demand step up and shift the balance in the market. Looking at some of the past years, it has been late May or early June when we normally see a distinct step higher in cooling demand, which in turn puts us on a little different slope as far as accumulating gas in storage is concerned."

Looking at the pending summer heat and hurricane picture, Evans said he believes time itself is working in favor of the bulls. "Whether it is the long-range forecast for summer heat or a tropical storm in the Gulf of Mexico threatening supply, if the market does not simply work lower day after day or week after week in the meantime, then that sets the stage for a short-covering price spike down the road. The market is already poised for a move higher just by futures being toward the upper end of its range despite what has turned out to be a pretty consistent weather pattern and a pretty consistent storage build."

Going into Monday's session, a number of traders were anticipating another test of the elusive $8 threshold in spite of moderate weather conditions, while some continued to see the market holding within its broad $7 to $8 trading range until Mother Nature changes the game plan.

"The gas market continues to trade in its protracted trading range. Sometimes these trading ranges can go on for quite some time," said Mike DeVooght of DEVO Capital Management, a Colorado trading and risk management firm. From his perspective the greater the price move prior to the range developing, the longer the market will consolidate within that range.

"Eventually, weather in the form of hurricanes or warmer-than-average temperatures will most likely be the cause that breaks us out of the range," he suggested. DeVooght does acknowledge the possibility of a repeat of 2006 where a lack of hurricane activity eventually paved the way for spot futures as low as $4.070 in late September, "but this will most likely not occur until mid-summer. In the meantime, we look for the trading range to continue and will hold current positions."

For trading accounts, current short positions of July futures at $7.850 are a hold, and end-users are advised to stand aside. Producers should continue to hold short a June-October strip at $8.500 for 75% of production, and a short winter 2007-2008 strip at $9 for 15% of production, DeVooght counseled.

Temperatures in eastern energy markets are forecast to fluctuate wildly this week, according to AccuWeather. Across the Eastern Seaboard highs are forecast to jump into the 80s by Tuesday but retreat quickly as a cold front marches in from the Midwest. Boston's normal high is 66, but by Friday temperatures will recede to 58. New York City will enjoy 83 on Tuesday, but by Friday will see a high of only 65. The normal high this time of year in New York is 71, the forecaster said.

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