Extending Friday’s losses, natural gas futures continued lower yesterday, as traders were greeted back from the weekend to a trading landscape devoid of anything resembling bullish news. Prices wasted little time in reflecting the negative sentiment, gapping lower at the open for the second session in a row before finding support just above the $3.00 level. The August contract notched its lowest closing price since May of 2000, slipping 18.2 cents to $3.068.

Although they have watched helplessly as prices slipped more than 10% in just two trading sessions, bulls saw some positives in yesterday’s session. “The market was well supported when prices dipped below $3.10. Every time sellers try to take the market beneath $3.00, buyers are up to the task,” a cash trader commented. He may have a point; since June 29, the August contract has moved down to the $3.04-05 level four times but has only broken beneath it during the Access trading session. Even on those two occasions, the market was unable to break the $3.00 level.

Looking ahead, Cynthia Kase of New Mexico-based Kase and Co. suspects natural gas will eventually penetrate the $3.00 level to make a run first at $2.93 and possibly $2.50. However, in the short-run the $3.00 level may be hard to crack. “It is not at all uncommon in mid summer for the market to become concerned about every rumor relating to hurricanes or heat waves. The difficulty is, of course, that if the hurricanes and heat waves do not materialize to the extent expected, the market will have overreacted.

“In any case, this is one of the patterns, which show up in the technicals to indicate that the $3.00 [level] may take some time to break. It also tells us that the market may hold for a while and chop around sideways….,” she wrote in Commentary on Gas for the week ending July 13.

On the other hand, if traders ever needed an opportunity to demote natural gas prices below $3.00, now is the time. After experiencing some average and above average heat last week, most of the country is expected to see normal to below-normal temperatures by the end of this week, according to the National Weather Service. Only the Central Plains, New Mexico and West Texas are expected to see above normal temps.

That bearishness, coupled with the likelihood of more price negative news when the American Gas Association releases its weekly report, has fundamental traders fearing the worst. Preliminary expectations are calling for a 90-110 Bcf injection.

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