Plummeting crude values, a near-term reduction in weather-related demand, a strong showing from the U.S. dollar and less risk from Hurricane Bertha combined on Tuesday to help August natural gas futures record its second consecutive day of a 60-cent decline. The prompt-month contract recorded a late regular session low of $12.355 before closing out the day at $12.368, down 60.9 cents from Monday’s finish.

Cementing the bearish start to the week, front-month natural gas futures have now peeled off $1.209 in the first two days of trading. Crude futures have had a lot to do with the decline in natural gas as the August crude contract on Tuesday dropped an astounding $5.33 to close at $136.04/bbl. The two-day decline stands at $9.25.

“I think a lot of different things were going on headed into the long holiday weekend. There was so much froth built into everything. We had Bertha storm concerns, temperature worries and uneasiness heading into a long weekend,” said a Washington, DC-based broker. “We came back and Bertha and temperatures really fizzled. We saw some profit-taking coming in this week as questions came up about whether the problems with our economy might be spreading internationally. We haven’t had much in the way of weather. We had windows open in DC over the long weekend, which is pretty unheard of in July. However, the forecast charts going forward look a little bit more bullish.”

The broker said she believes the declines in crude and most commodities on Tuesday surely helped natural gas values to move lower. “Gold and a lot of the agricultural commodities were all down Tuesday. I think the strengthening in the U.S. dollar has given a reason for people to take some profit off the table.”

The broker noted that while the pullback of prices had been expected sometime soon, she is not ready to dust off the $9 price area anytime soon. “I think we are seeing a correction that just needed to happen,” she said. “We did break an uptrend line and some of the retracement numbers bring us back into the mid-$11 area. We have some minor support coming in the $12.20s as well. However, I don’t think people should get too comfortable here. My end-user business has seen a lot of business already this week because people are in buying the dips. People are taking their shots when they can. You have to remember that the hurricane season is still quite young. I don’t think we have a chance of seeing $9 gas again until maybe October.”

Following Monday’s decline, other traders were also not ready to call it the end of the uptrend. “We are viewing [Monday’s] sharp price pullback as corrective and as largely representing an evaporation of storm premium as Hurricane Bertha appears poised to avoid both the Gulf and East Coast regions of the U.S.,” said Jim Ritterbusch of Ritterbusch and Associates. Ritterbusch is looking for warm weather next week, however, to increase electrical generation demand and thinks the market “may still need to price in an upswing in [electric generation] demand in view of forecasts for hot temperatures next week across much of the heavy population centers of the Northeast and Midwest.”

A leading forecaster, however, sees a cool front for the Midwest in its latest forecast. In its six- to 10-day forecast MDA EarthSat sees a front arriving at the beginning of the period. “The cold front in the Midwest arrives at the beginning of the period,” said Matt Rogers, MDA EarthSat director. He added that most areas drop back to “near-normal readings, and warming will occur later in the period but is not enough to get the area back to above normal.

“The cold front then pushes through the Northeast. The [weather] models are aggressive with the cooldown but based on recent fronts, we slow the cooling, which allows much of the region to stay above normal for at least another day.”

While Bertha energized into a powerful hurricane over the past few days, the storm had weakened to Category One strength late Tuesday with wind speeds down from 120 mph to 85 mph. The storm was still tracking to the north-northwest and on its current course did not appear to be threatening the United States.

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