With below normal temperature forecasts and no immediate threat from tropical storms or hurricanes, the natural gas futures market tumbled to fresh, four-month lows Monday on selling from both commercial and speculative accounts.

The final two months of the 2004 summer strip were the hardest hit with the September and October contracts sloughing 15.5 and 15.9 cents to close at $5.378 and $5.499 respectively. Meanwhile, uncertainty about the weather this winter limited the losses in the November through March winter strip, which sifted 7.4 cents lower to average $6.587 Monday.

According to the latest six- to 10-day forecast released Monday by the National Weather Service, below normal temperatures are predicted for roughly two-thirds of the United States for the August 22-26 timeframe. Exempted from these cooler-than-normal temperatures is the Northeast and the extreme eastern seaboard down through North Carolina, and west of the Rockies, where normal temperatures are expected to take shape.

However, the temperature outlook was not the only bearish weather factor Monday. Also pressing down prices, traders agreed, was selling associated with the dissipation of Tropical Storm Earl, which weather watchers had given a decent shot of reaching the Gulf of Mexico. Meanwhile, Hurricane Danielle, located out in the middle of the Atlantic Ocean, is forecast to curve to the north and then to the east and pose little or no threat to US gas production areas.

But not all the tropical news was bearish yesterday. As of press time Monday afternoon, the National Hurricane Center was tracking a westward moving tropical wave located about 300 miles south-southeast of the Cape Verde Islands. Some slow development is possible during the next few days, the NHC said.

The lack of an imminent storm threat Monday gave traders and market watchers a chance to ponder the release of Thursday’s storage report. This exercise was a little trickier this week as analysts struggled to factor in the nearly 5 Bcf of total gas supply taken out of the market by last week’s hurricanes.

“Our estimate (70 Bcf injection) includes an approximate reduction of 5 Bcf which was not available for injection due to the shut in caused by Hurricanes Bonnie and Charley,” noted Thomas Driscoll of New York-based Lehman Brothers. “If our storage estimate is correct, the storage surplus versus a year ago would decrease from 230 Bcf to 223 Bcf and the storage variance versus the 5-year average would increase from a 117 Bcf surplus to a 128 Bcf surplus.,” he wrote in a note to clients Monday.

Pointing to degree day cooling tallies 29% below normal (think mild summer temperatures), last week, Mississippi-based analyst Stephen Smith calls for a whopping 87 Bcf addition to underground storage stocks. Had the weather last week been “normal,” Smith would have called for only a 63 bcf storage build, 24 Bcf less than his estimate. Last year the market managed a 77 Bcf refill and the injection this week over the last five years has averaged only 59 Bcf.

Having plumbed to $5.36, the September contract now looks ripe for a move down to the daily continuation chart low at $5.29 notched in March, says Tim Evans of IFR Pegasus in New York. “The $5.06 bottom from February and the $4.39-60 lows from the September-November 2003 era are the next levels to watch in the event of a further slide,” he continued. On the upside, Evans sees resistance at $5.64 and then again at the $5.80-84 area.

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