The cash market fell on average by about 7 cents Monday as the weather outlook moderated for many parts of the country. Significant weakness was seen at Northeast points as well as the Eastern seaboard, while California locations managed to post gains. At the close of futures trading August had risen 10.7 cents to $2.883 and September added 9.0 cents to $2.876. August crude oil rose $1.54 to $85.99/bbl.

The weakness in the physical market was not enough to bring many buyers to the table. “We don’t need to buy much gas for July, and we’ll only make purchases if the price falls below index,” said a Great Lakes marketer. “We were quoted on Consumers $2.93 and we paid $2.859 on index so its getting close.”

The marketer said that for the most part the brutal heat bearing down on the Midwest and elsewhere last week wasn’t enough to cause buying to make up presumably higher usage.

Quotes on Michcon and Consumers were lower by about a dime each, and gas at the Chicago Citygate and Alliance fell more than a nickel. Gas delivered to Northern Natural Gas Ventura was flat.

In the East and Northeast prices at some points fell close to a dollar as the weather outlook moderated.

“A scorching heat wave that affected much of the eastern two-thirds of the nation, setting an astonishing number of temperature records, has ended across the Midwest and mid-Atlantic,” said AccuWeather.com meteorologist Meghan Evans.

“While the heat wave subsides across portions of the East, scorching heat shifts into the West. Helping to break down the heat in the South will be a zone of drenching showers and thunderstorms from Texas to North Carolina and southern Virginia.”

She added that “More than 3,840 temperature records were shattered in the U.S. from July 1- 8, 2012, according to NOAA. The tally of record high temperatures during the time period is 2,476, and the tally of maximum low temperature records is 1,365.”

Next-day gas at the Algonquin Citygate dropped close to 90 cents and deliveries on Iroquois Waddington fell nearly a quarter. Parcels into Tennessee Zone 6 200 L were off close to 80 cents.

AccuWeather.com forecast the high in Boston would hold steady at 82 for Monday, Tuesday, and Wednesday. The normal high in Boston this time of year is 81. It also said that Chicago’s Monday high of 91 would drop to 88 on Tuesday and Wednesday. The normal high in the Windy City is 85, but on Friday Chicago registered a high of 104, according to the forecaster.

At eastern points prices also weakened. Tetco M-3 was seen about a dime lower and Transco Zone 6 New York came in down about 20 cents.

High temperatures in Los Angeles the next few days are expected to be right at the seasonal high in the low 80s, but prices at southern California locations firmed as speculation surfaced on the long term fate of the San Onofre Nuclear Generating Station (Songs). As the facility remains idle, added pressure is being placed on the state’s mostly natural gas-fired generation fleet. Gas plants account for about two-thirds (67.5%) of the state’s 50,341 MW of available capacity, according to the state grid operator, the California Independent System Operator (CAISO) (see related story).

Deliveries to SoCal Border were seen about 7 cents higher, and gas to the SoCal Citygates added close 6 cents. Gas on El Paso S Mainline rose a couple of pennies.

Malin was unchanged and PG&E Citygate fell a couple of pennies.

Futures traders see the bullish case with new legs, at least for the time being. “I could see the market getting above $3,” said a New York floor trader. “I don’t know if that would be sustained, especially if the weather backs off a little bit, but I think we’ll get over $3 on the momentum that is happening, maybe $3.08 or so and we back off from there.”

He cautioned the a rise to $3.08 “might be a head fake, a bull trap.”

Market technicians and fundamentalists often make strange bedfellows. Friday’s technical free-fall after making new highs has trend followers and wave counters alike scratching their heads, but fundamentals traders see a positive tone to the market as the storage surplus gradually diminishes.

“This market could move into a choppy, wide-swinging trading phase this week in which values could be little changed by mid-month despite some high price swings,” said Jim Ritterbusch of Ritterbusch and Associates. He suggests that this type of trading may prevail in the short run.

“This type of pricing scenario would likely be facilitated by an evolving contrast between Friday’s technical breakdown and fundamentals that still appear to be leaning in a bullish direction. At this time of the year, short-term temperature forecasts tend to drive natural gas pricing until the hurricane season becomes more active. Weekend updates to the weather views are still favoring above-normal temperature patterns across the northern half of the U.S. and the eastern portion of the nation out toward July 22nd,” he said in a morning note to clients.

Near-term weather forecasts still have a theme of above-normal temperatures in major energy markets, but the intensity is not expected to be as great as last week. MDA Information Systems in its morning six- to 10-day outlook shows above-normal temperatures bounded by Virginia and the Ohio Valley on the south extending out to North Dakota. “This period has turned a bit warmer across the northern tier since Friday, but also slightly cooler within parts of the South.

“The large-scale themes, however, remain unchanged as ridging is still expected to stretch across much of the North while troughing impacts the South. The resultant heat within the Midwest will be of a lesser intensity than what has been common the past week to 10 days, but still well above normal. Daily chances for showers and storms across the South will keep hotter potential on the low side. The warmth within the [Northwest] appears longer lasting than initially anticipated.”

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