Almost exactly as it did Friday, natural gas futures opened higher, but ultimately tumbled lower Monday as technical factors and scale-up selling dictated the trading action. The August contract finished at $2.947, up 1.4 cents for the day, but more than a nickel below its mid-morning high at $3.00. Volume was heavy with an estimated 108,301 contracts changing hands.

Traders polled by NGI were quick to point to bullish weather forecasts as a reason for the futures market being so fast out of the gate. According to the latest six- to 10-day forecast released Monday by the National Weather Service, above normal temperatures are expected over the entire eastern half of the country by the end of this week. Below-normal readings, the NWS said, will be confined to California, the Pacific Northwest, and the Northern Rockies. The rest of the country, including the Western Plains, the Central Rockies and parts of the Southwest are forecast to see normal heat.

But despite the price-constructive nature of that forecast, bulls were unable to do much with it. Instead, scale-up commercial selling conspired to cap the advance at the psychologically important $3.00 level. Local traders were seen following that lead and by 12:30 p.m. EDT, the August contract had moved down to notch its low for the session at $2.87. However, just as had been the case on Friday, the market was unable to pierce support, and that enabled the prompt contract to rally at the close.

With three-straight sessions of higher highs and higher lows under its belt, the market is likely Tuesday to test last week’s Access high at $3.019, market-watchers agree. For Tim Evans of IFR Pegasus in New York, a break of resistance there could pave the way for August to grind higher into the Fibonacci levels at $3.09, $3.19, and $3.29.

Technicals aside, the market may gain some fundamental momentum from early expectations out ahead of the Thursday release of fresh storage data. Citing hot temperatures last week, Evans weighs in with a 55-60 Bcf injection estimate, which if realized would fall short of last year’s 77 Bcf build as well, as the five-year average increase of 66 Bcf. Similarly, Thomas Driscoll of Lehman Brothers has lowered his injection call for the week ending July 19. Last week he predicted a 65-70 Bcf injection, but after digesting degree day data from the NWS, he now looks for a 60 Bcf refill.

In daily technicals, the $3.02 level is a pivotal level to the upside. To the downside, a break below recent lows at $2.76 could be a back-breaker for the bulls, who would to think the market is putting in a rounded bottom formation.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.