After running up and hitting the key $8 resistance level late last week, July natural gas futures spiraled lower on Monday, following a well-worn trading pattern of the last few months. The prompt month settled at its low of the day at $7.690, down 22.8 cents from Friday’s close.

The even more impressive thing about the decline in natural gas was the fact that July crude futures put in a strong showing during the day. July crude gained $1.09 to $69.09/bbl.

Even with the 22.8-cent drop in gas, some market watchers were unimpressed with the move itself, noting that the market is almost on “autopilot” here. “This is the kind of market you could almost go with computerized commentary,” said Tim Evans, an analyst with Citigroup in New York. “With the recent range, the computerized commentary could almost update itself.

“We hit resistance at the $8 level once again late last week and the market figures it can’t go up, so it has to go down. However, moving lower does not agree with the weather outlook. Using Frontier Weather’s projected cooling degree days, their number for last week and their number this week did not change by even one degree day. On top of that, their forecast for the week ending June 29 looks bullish. I can’t explain Monday’s 23-cent drop with an unchanged to bullish degree day forecast.”

In addition, Evans said the tropics couldn’t be responsible for Monday’s slide either. “Were traders really that disappointed that the rain shower activity south of Cuba Friday did not end up turning into a Category 5 hurricane?” he queried. “It wasn’t forecast Friday to become anything, so why would you be disappointed by that? In reality, the market is acting as a pure game of pong. We banged against the wall at $8 and came back down.”

As for who was behind the move lower Monday, Evans said answering that question becomes tougher and tougher. “It’s impossible to get a sense of who’s doing this stuff,” he said. “Eighty percent of the trades are now executed electronically, so you really don’t know who is pulling the strings.”

Traders see the market’s short-term direction determined by the weather. Although warm, humid weather is forecast for the East and above-normal temperatures are expected in the West, the pace is behind last year. “The market continues to bide its time awaiting some type of weather event,” said Mike DeVooght, president of DEVO Capital, a Colorado risk management and consulting firm. He advised clients to hold current positions and “await further developments.”

DeVooght suggests trading accounts to hold short a July futures position at $7.850 and end-users to stand aside. He urged producers to hold short a July-October strip at $8.500 for 75% of production and also a short winter 2007-2008 position at $9 for 15% of production.

Weather bulls may find upcoming temperatures to their liking. The National Weather Service (NWS) forecasts above normal accumulations of cooling degree days (CDD) in key eastern energy markets. For the week ended June 23, the NWS predicts New York, New Jersey and Pennsylvania will receive 44 CDD, or 11 more than normal. Ohio, Michigan, Indiana, Illinois and Wisconsin should see 53 CDD, or 14 more than normal. Both tallies, however, fall below last year’s searing 63 CDD for the Mid-Atlantic states listed above and the 58 CDD recorded for the Midwest states.

AccuWeather reports temperatures in the 90s as far north as New York City on Monday will continue on Tuesday. “An increase in humidity will add to the sultriness of the day Tuesday,” said meteorologist Kristina Baker. Out West warm temperatures are also expected to prevail. “Behind a departing front, an upper-level high pressure ridge will pump hot air throughout the Rockies and High Plains,” said AccuWeather’s Bob Tarr. He added that Denver will be easily into the 90s for several days beginning Wednesday, and a triple-digit reading is not out of the question. “By Friday, highs will be into the 90s as far north as the Canadian border,” he said.

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