As much of the eastern half of the United States braces for its second dose of significant summer temperatures Thursday, cash prices for much of the country on Wednesday soared between a dime to more than a dollar, with the Northeast region continuing to come in on the high side of the day's gains.

That bullishness was lost for the most part on the expiring July futures contract, which managed to post a five-and-a-half-month front-month contract high at $2.946 Wednesday before retreating to go off of the board at $2.774, up seventh-tenths of a penny from Tuesday. The last time a front-month contract traded higher was back on Jan. 11. Taking over as the new front-month contract, August futures finished Wednesday's regular session at $2.798, down nine-tenths of a penny from Tuesday's close.

"Prices are pretty strong out there and a lot of it is tied to the heat. It is supposed to be much warmer in the Northeast beginning tomorrow," said a Northeast marketer. "Closer to 90 degrees than 80, so it is another balmy couple of days. In Houston it is 103-105 degrees and Chicago is supposed to be around 90 Thursday, so demand is up everywhere to deal with this early burst of summer heat. We get this big run-up in prices on the hype. I bet it will be in the mid $5s on Tennessee."

Algonquin Citygate, Dracut and Tennessee Zone 6 200 Line were some of the largest gainers as gas at the three points traded between 90 cents and nearly $1.20 more than on Tuesday for Wednesday delivery. However, most Northeast locations added between 20 and 30 cents.

Most Gulf Coast points added nearly 20 cents, with the Henry Hub tacking on just more than 15 cents on the day.

Rockies locations went along with the herd on Wednesday as most points, including Transwestern San Juan, Opal and CIG picked up between 20 cents and a quarter.

From the looks of bidweek trading so far, the eastern marketer said he expects July bidweek to come in significantly higher than June. "On Tennessee, bidweek deals Tuesday...traded a lot around the $1.05 to $1.09 range. Who knows what the average for the month will come out, but I think it will be way over $1.05 and $1.06. We'll be well above June. Tennessee has maintenance that is going to be going on all month, so it is going to run up prices, unless someone finds another way to get gas over there. If prices get high enough, everyone starts moving Canadian gas to try to take advantage."

Even as July futures slid off the board like a lamb, some market watchers believe that the fundamentals might be lining up for a bullish strike. Laurent Key, an analyst with Societe Generale, said "this summer may turn out to be too hot for NG bears."

Key, who ran three natural gas inventory forecasts based on different temperature outlooks -- normal summer, front-loaded hot summer and "all out torching summer" -- found that market bulls may have reason to smile soon.

"The bottom line of these simulations is that the weather has not favored our June bearish stance and it is time to stop the 'short the rally strategy'," which he published earlier this month, Key said in a research note. "A more bullish price forecast revision will likely be published by the third week of July, once the first August weather forecasts are out. Tighten your stops if you still feel like a bear under the current conditions."

Citi Futures Perspective analyst Tim Evans warned that traders might want to take a wait-and-see approach on summer heat.

"The natural gas market is translating forecasts for warmer than normal temperatures into a further test of the upside, which will keep the storage surplus on a consistent downward track," he said. "We'd bear in mind, however, that this is a classic weather trade and we're still waiting for evidence that U.S. production has slipped to a degree that would help rebalance the market over the intermediate to longer-term cycle. A break in the heat, and prices will retreat."

Turning attention to Thursday morning's inventory report from the Energy Information Administration for the week ending June 22, industry estimates appear tightly grouped for an injection well below normal. Both Reuters and Bentek Energy are expecting a 52 Bcf build when the EIA releases the report at 10:30 a.m. eastern on Thursday, which would be well shy of both last year's adjusted 84 Bcf addition for the week and the five-year average build for the week of 85 Bcf.

"Despite weaker-than-historical injections, U.S. storage inventories are projected to reach a record high by the end of the season," Bentek said in its weekly storage outlook. "Downward pressure on prices is expected."

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