Bringing the string of consecutive expirations in the $7.50s to four, June natural gas futures on Tuesday put in a low of $7.490 before expiring at $7.591, down 4.9 cents on the day. The settle also marked the June contract's seventh consecutive lower regular session close, bringing the loss streak to 48.4 cents.

With the March contract going off the board earlier this year at $7.547 and the April and May contracts expiring at $7.558 and $7.508, respectively, some traders said it seemed logical that June would trek lower to finish near those marks. However, the June contract had a lot further to fall, seeing as how it was trading as high as $8.230 just over a week ago.

"Look at your settlement over the past couple of months. Once you see that they were all in the $7.50s, it's easy to see the pattern," said Ed Kennedy of Commercial Brokerage Corp. in Miami. "That tells me we are adequately priced. The rules remain the same. If you see anything less than $7.30, you buy it, while if you see anything up around $8 you sell it, and ultimately it is going to settle in the $7.50s."

As for who was moving or shaking on expiration, the broker explained that the last half hour is purely who wants to make or take delivery at these prices. "It is price-driven and it is hedge-driven," Kennedy said. "It was interesting Tuesday as we were big sellers because the only people we had left were end-users and they rallied right into us. So I think some of the short position holders may have stayed too long at the fair."

At this point, Kennedy said, you have to look ahead at the potential for pattern-altering events. "Looking at the models, AccuWeather said Tuesday to watch out for possible storm development out in the western Caribbean in the next five to eight days. There is nothing there now, so it is just background noise right now, but with the hurricane season officially starting on Friday, we will have to see what happens," he said. "The water temperatures in the Gulf of Mexico and Caribbean are way above normal, so something could pop early."

As for summer heat, Kennedy said the forecasts are all looking for some above-normal temperatures for much of the country. "It's almost June, so sure it is going to get hot," he said. "We are going to experience above-normal temperatures and that's fine. I don't see it getting us out of this trading range. We need some impact on production and right now that is not in anyone's forecast."

Jay Levine, a broker with enerjay LLC, said June's expiration could be looked upon as bearish. "I do think that [Tuesday's] session, as well as the session's leading up to it, signals a modest if not potentially significant shift in the wind -- even as I remain long-term bullish -- but between histrionics (about supply and supply disruptions and demand, and not enough demand destruction) and putting the cart before the horse, I tend to believe the whole complex has gotten carried away. And it doesn't take much -- between a couple of sessions -- to turn the tide, the complexion and the price."

On the downside, Levine said he sees a test of support down in the $7.50 -- maybe even $7.40 area -- with resistance starting at $7.90 up to $8.

Risk managers saddled with the responsibility to ensure that clients' exposure to adverse market moves is minimized see the market in a somewhat precarious position, teetering on the edge of support and just needing a nudge to send prices lower. Mike DeVooght of DEVO Capital Management, a Colorado trading and risk management firm, believes that "technical breakdown levels" at $7.50 to $7.52 will be closely watched this week for signs they might give way, but on a fundamental basis, it was very quiet last week. The weekly gas storage number was only slightly above expectations, and the lack of weather continues to keep the market in a holding pattern, he said.

Prior to Tuesday's session, DeVooght was apparently anticipating further market weakness. He advised trading accounts to hold short a July position at $7.850 and end-users should stand aside. Producers and those exposed to lower prices should hold short a June-October strip established earlier at $8.50 for 75% of production along with a short winter 2007-2008 strip at $9.00 for 15% of production. He advised producers to increase that position to 25% Tuesday morning.

Warm weather may take the market out of its holding pattern. Later in the week above-normal temperatures are forecast for large eastern energy markets. According to AccuWeather meteorologist Kristina Baker, "An area of high pressure Tuesday will produce comfortable conditions over the Northeast. Afternoon temperatures will be in the 70s and lower 80s with low humidity and plenty of sunshine." That, however, is expected to change. Baker said that once the high-pressure center slides southeast, humidity and temperatures will begin increasing through the end of the week. New York City by Friday will see a high of 86 whereas it's norm for this time of year is 79. Washington, DC, should reach 84 by Friday whereas its norm is 75, the forecaster said.

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