After a volatile three days of seller-dominated trading Tuesday,Wednesday and Thursday last week, the futures market was quietFriday as light pre-weekend short covering was almost perfectlymatched by follow-through selling. The August contract could manageonly a 4.5-cent trading range before finishing 0.1 cents higher forthe day at $2.163. Estimated volume was relatively modest, with55,158 contracts changing hands.

A Chicago trader expects more of the same this week when tradingresumes. “The market banter is calling for a period ofconsolidation followed by another move lower to test the $2.06,$2.00 and possibly the $1.95 mark,” he said.

“Funds are still long and they are slowly letting the air out ofthe tires,” adds Tom Saal of Miami-based Pioneer Futures. “Only nowthey have momentum and lack of fundamentals are in their favor.Some people think that because of weather forecasts that continueto call for warm temperatures, prices should stay strong. What theyfail to realize is that despite record-setting temperatures lastweek the best the market could do was trade at index levels. Can itget any hotter than it was [the week before last]?” Saal asked,only half joking.

What about all the talk of decreased production and reduceddeliverability? An exaggeration, insists Saal. “The cure for higherprices is higher prices,” he quips. Supply has already started torespond to higher prices. Rig counts are up and [Department ofEnergy] supply figures are starting to look better, he continued.

And Susannah Hardesty of Indiana-based Energy Research &Trading shares his bearish view. She feels that even if support at$2.15 holds initially this week, it will eventually fall by week’send. “Remember, that the overwhelming trend in futures prices isdown, during the month of July. Even with the tight injections thisspring and this [past] week, the storage situation is currentlylarger than all prior years since the [American Gas Association]has been keeping data in 1994,” Hardesty wrote in Natural GasWeekly Report dated July 8. Looking ahead, she looks for prices tonotch the first bottom of the Summer low on a move between $1.80and $2.00 sometime before the expiration of the August contract.

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