After taking a one-day respite from lower prices on Thursday, August natural gas futures values moved downward again with August crude on Friday as near-term fundamentals remained weak. August natural gas closed at $3.373, down 3.5 cents from Thursday’s close and 24 cents lower than the previous week’s finish.

August crude resumed its descent as the contract finished Friday’s regular session at $59.89/bbl, down 52 cents from Thursday’s close. Thursday marked the only closes higher for both commodities during the week.

“The natural gas market remains on the defensive, with traders worried over the falling petroleum values and not trusting the recent, more-supportive storage data, said Tim Evans, an analyst with Citi Futures Perspective in New York. “We’re aware of some pipeline watchers looking for a build of 100 Bcf or more for the week ended July 10, factoring in a large demand drop associated with the July 4 weekend. However, while that would match last year’s pattern, the five-year average result suggests a smaller impact and we’re sticking with our own 82 Bcf forecast, moderately below the 89 Bcf five-year average.”

A New York broker added that it is difficult to get a full read on the market at this time. “It looks like we might be making another run at the lows down at $3.155, but I just don’t know if we’ll get there or not,” he said. “If we do, I’m not sure there is much more room to the downside because $3 gas has been a pretty cheap price over the last seven years. As for the upside, there is obviously a lot more room to roam, but there needs to be a trigger, which at this point is MIA [missing in action].”

Evans added that the weather looks like it will continue to be no friend of the market bulls. According to Frontier Weather’s outlook for July 15-19, above-normal temperatures are expected in the inland portions of the West and the southern Plains to the lower Mississippi Valley and the Texas Coast, while below-normal conditions are expected in New England. For July 20-24, the private weather service said temperatures are expected to average warmer than normal in the West and northern Plains, with normal conditions elsewhere.

Evans said the 2009 Atlantic hurricane season still has yet to begin, noting that while there is a tropical wave entering the eastern Caribbean, conditions are still unfavorable for development.

Following the Energy Information Administration’s (EIA) smallish 75 Bcf storage injection report Thursday for the week ending July 3, some traders were unimpressed with the 5.5-cent gain by August futures on the day, noting that such a small move in the aftermath of a supportive inventory report emphasized the oversupplied nature of the market and indicated that lower prices may be on the horizon.

“The market’s limited bullish response to yesterday’s seemingly supportive EIA storage injection [75 Bcf] underscores the heaviness of this market and the likelihood of additional declines of as much as 20 cents compared to [Thursday’s] settlement within a very short time frame,” said Jim Ritterbusch of Ritterbusch and Associates. He added that the storage bulge “remains valid as a bearish consideration; we still feel that this big supply overhang has been discounted and that the market has been reacting largely to the dynamic of some unusually mild temperature patterns across key consuming regions.”

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