After a brief uptick during the Wednesday night Access tradingsession, natural gas futures continued lower yesterday at the NewYork Mercantile Exchange and settled below key support levels. Julyfinished at $2.285, after carving out a $2.27 low early Thursdaymorning. Estimated volume of 95,938 was almost double that ofMonday and Tuesday.

Most sources contacted by NGI were at a loss to explain thefutures weakness in the face of supportive weather forecasts and ayear-on-year storage surplus that was erased to zero last week. TheNational Weather Service released its six- to 10-day forecastWednesday, which calls for a warming trend next week across much ofthe country.

A Dallas-based source, however, points to the mild weather thatmuch of the nation is currently experiencing as a bearish factor inthe near term. “Cash prices came off this morning and brought thefutures market with it. Cash has not been supporting the screenvery well lately and futures finally fell under its own wait,” sheexplained.

Technically, she believes the July contract will have to dodge abullet today if prices have any chance of trending higher. “Thereal test will be if the market settles below the 40-day movingaverage for the second day in a row Friday. Typically two straightsettles below the 40-day will spawn a round of selling. If thathappens, then a move back into the high $2.10s is not out of thequestion.” The 40-day moving average for July is currently $2.325.

A Houston trader agrees that the market is vulnerable to furtherlosses tomorrow, but warns that bulls have had good luck latelyheading into the weekend. Despite mixed cash prices and marketsentiment pointing lower the futures market has posted gains thelast three Fridays.

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