Buoyed by forecasts for significant heat in the Southwest and the arrival of the first tropical storm of the 2008 Atlantic hurricane season, July natural gas futures pushed above $12 in Monday trade to record a high of $12.203. However, the momentum could not be sustained as the prompt-month contract dropped to close at $11.969 — still good for a 26.6-cent gain over Friday’s finish.

“I heard some people talking about triple-digit temperature forecasts in the South and Southwest. If true, that would be the first news of that nature and would have an impact on the market much like the first hurricane of the season, which always grabs the headlines,” said a Washington, DC-based broker. “Personally, I don’t understand the big deal about Tropical Storm Arthur developing over the weekend. Hurricane season comes every year, we know this already. Arthur rained on Nicaragua and it’s news? I just don’t get it.”

The broker said the rise over $12 was impressive Monday morning, but he was more interested in what happened afterwards. “While we traded well over $12 on the day, I think the key was the fact that the market was unable to close above that price level. We came close to getting up to the old high at $12.209, but didn’t quite get there. So, we’ll see if we hit another trading zone or whether we chop back and forth a bit. Our momentum guide indicators keep making less than impressive moves when we make these runs up, so I am still marginally bearish on things here. Now if we break through $12.210, then I’d probably have to be on the long side of things.”

Some top traders are getting ready for summer weather and tropical activity (see related story). “Looking forward we look for volatility and trading activity to start to pick up in the next couple weeks. This weekend was the official kickoff of the hurricane season and the beginning of the cooling season,” said Mike DeVooght, president of DEVO Capital Management, a Colorado-based trading and risk management firm. DeVooght recommends holding on to current positions and said he will be keeping a sharp eye on weather developments.

For trading accounts he recommends holding a short October/long January spread at 70 to 75 cents, and end-users are counseled to stand aside. Producers and physical market longs should “continue to hold a July-October $11.500 put strip established at 75 cents,” he said in a morning note to clients.

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