After a wild week that saw the natural gas futures market survive heat waves, August’s expiration and a 7 Bcf storage withdrawal in the heart of July, natural gas futures traders gave it a rest on Friday. In its first regular session action as front month, September natural gas briefly sank below $7 before settling at $$7.184, up 6.1 cents on the day and 93.6 cents higher for the week.

After opening the day higher, September futures put in a low of $6.950 late on Friday before rallying higher to close. August futures also occupied $7 territory before expiring Thursday. Following a surprising 7 Bcf storage withdrawal report from the Energy Information Administration, the contract expired Thursday 15.5 cents higher at $7.042.

“It was pretty quiet on Friday. There was more book-squaring action ahead of the weekend than anything else,” said Steve Blair, a broker with Rafferty Technical Research in New York. “I think most people did their moving and shaking during the week. Thursday’s report of a storage withdrawal really caught a lot of traders off guard, which helped push futures up above $7 for the first time in a while.”

The broker added that it appears the baton has been passed from the bears to the bulls in the market as the country’s heat dominates headlines. “I think the bulls pretty much have the reins right now,” he said. “Now that we are smack in the middle of summer entering August, I think this market has seen the lows for the summer. The bulls have taken hold of the market and I think weather will now take over. All of the heat that we have been having is starting to bring down the surplus in storage and I would be surprised to see the market below $6.50 again for the rest of the summer, if it even gets there at all.”

Blair noted that while the tropics have been pretty quiet so far this year, the potential for development is a constant. “A lot of people on Friday were talking about the wave in the central Atlantic,” he said. “If it shows signs of development this weekend, traders will be buzzing with activity during the beginning of next week.”

Natural gas bulls counting on a strong economy to turn around industrial demand “destroyed” in the aftermath of last year’s post-Katrina price explosion took a soft economic report in stride. The Commerce Department reported Friday that U.S. economic growth slowed in the second quarter to a 2.5% annual rate after a torrid 5.6% pace in the first quarter. The 2.5% real growth was weaker than the 3.1% gain expected by economists surveyed by MarketWatch. The economy has grown 3.5% in the past four quarters. In addition, core consumer prices rose 2.9% annualized, the fastest pace in 12 years, keeping the pressure on the Federal Reserve to stay on top of inflation. Core consumer prices have risen 2.3% in the past year, the fastest growth since 1995.

Treading above $7 is rare territory for the recent market and traders are nervous as to whether the market can hold such lofty gains; $7 support is not a done deal, some say.

“I honestly think (natural gas) is more relevant to the petroleum complex, for everything has this premium in it that can evaporate or explode with the next news headline,” said a New York floor trader. He suggested that crude oil had a $15 to $20 fear premium in it, and natural gas is catching up with that. “It’s totally vulnerable to a big correction from some sort of headline. It’s a real skittish market right now; $7 support could give way at any time, and it’s a tough market to trade,” he said.

The short-term weather headlines appear to be concentrated far from large energy markets, yet that is forecast to change. “The big ticket item in the weather this weekend will be the unrelenting heat over the northern Plains,” says Gerald Mohler, an AccuWeather meteorologist. He predicted 100-degree heat in a large part of this region. This heat, however, will expand eastward into the Northeast over the next couple of days and will be accompanied by oppressive humidity, he added.

“Across the Northeast, the heat is expected to remain, if not increase, during the first few days of [this] week,” said Mohler. “The jet stream will remain deflected rather far to the north over eastern Canada, trapping any cool air across northern Ontario and northern Quebec. High temperatures early next week throughout the Northeast should be well up in the 90s in most locations, and there may be a few spots that reach 100 degrees before the heat starts to wane late in the week.”

AccuWeather also reports that maps and satellite data show no organized tropical systems across the Atlantic Basin. The forecaster, however, is following tropical waves at 28W (African coast), 38W (Atlantic Ocean), 72W (Caribbean) and 90W (Yucatan).

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