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Cash Slides a Second Day on Screen Weakness

Continuing to take cues from the sagging natural gas futures complex, cash market values far and wide slid for a second straight day on Wednesday, shrugging off forecasts for a heat-wave return for much of the East.

The declines were much less severe than the 10- to 15-cent drops witnessed on Tuesday for gas delivery Wednesday. Most points Wednesday across the country dropped from a few pennies to just shy of a dime, while a few averages in the Rockies and the West managed to put together gains, which in most cases were less than a penny.

"Not a lot going on out there really. Things were pretty flat, but the buying we were seeing was mostly by power plants," said a Northeast trader. "It is going to be 81 degrees in Boston Thursday and we're expecting a little bit of an uptick in New York as well, so the heat looks to be making a return of sorts."

Going forward, the cash market won't have the same negative support it enjoyed from the screen on Monday and Tuesday. That said, it won't exactly have reason to claw higher either. The July futures contract on Wednesday finished the regular session at $4.577, down four-tenths of a penny.

Jim Ritterbusch of Ritterbusch and Associates is fairly bearish on the natural gas complex. "A $4 price handle could exist through next month and beyond unless temperature deviations offer extremes or the hurricane season gets an early and active start," he noted.

However, the warmer temperature outlook for the country could prop prices up a bit as gas demand increases. MDA EarthSat warned that warmer-than-normal conditions are likely to make another appearance next week.

After "a more seasonal and spring-like weather pattern this week in the Midwest and East, strong heat returns early next week," the forecasting service said. Temperatures are not expected to reach the same levels as the heat wave earlier this month, but anomalies of eight- to-12 degrees above normal are likely to be seen at the height of the event, along with heat indices close to 100F.

"This next heat event in the PJM region may not be as extreme or long lasting as those earlier in the month, but a quick, potent round of heat appears likely from Chicago eastward to the I-95 corridor as next week progresses," states Bob Haas, Weather Operations Manager for MDA EarthSat.

Combined with summer temperatures finally arriving in the West and the continuation of record-breaking heat in Houston, air-conditioning load is likely to ramp up.

Another price supporting fundamental will likely be discovered in Thursday morning's natural gas storage report from the Energy Information Administration for the week ending June 10. Bentek Energy, Stephen Smith Energy Associates and Citi Futures Perspective analyst Tim Evans are all calling for a 71 Bcf injection, which would be bullish for gas prices considering last year's date-adjusted build of 89 Bcf and the five-year average addition of 87 Bcf.

In its weekly storage outlook, Bentek noted that the smallish injection estimate is the result of "extreme heat" in the Producing Region, which likely dropped injections in the region for the week by 65% from the previous week. The research and analysis firm expects a 48 Bcf injection in the East Region, a 15 Bcf injection in the West Region and an 8 Bcf injection in the Producing Region.

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