With most traders starting their Independence Day holiday early, August natural gas futures trading on Tuesday was mostly muted. The prompt month traded within a slim 11.5-cent range before settling at $6.754, down a penny on the day. Whether this week’s slowdown of the recent price drop is due to anything other than pre-holiday trading remains to be seen.

“I am a little bit grateful that the price stuck within the recent range Tuesday because the most difficult situation to deal with would have been some sort of technical breakout, which you would wonder whether you could trust given the fundamental uncertainties here,” said Tim Evans, an analyst with Citigroup in New York. “I can kind of understand why people would want to be cautious here in terms of taking on new positions.”

When is a holiday not a holiday? Evans queried. “The answer is when Globex is open. Soon it’s definitely going to be trading via Blackberry 24 hours a day,” he said. “We have this funny quasi-holiday Wednesday due to the fact that Globex will still trade, and we are not going to see the fresh storage data till Friday, so I am not sure people are going to want to tackle a new position on Thursday or Friday. That means it might be Monday before people are really ready to trade with both hands again, but the key is how much the weather outlook could potentially evolve by then. A lot can happen over that period.”

Looking at the market on the whole, Evans said the larger issue is how low is low enough. “I don’t have the magic answer for that other than to wait and see whether we have another price leg down in this thing,” he said. “It really becomes what point in the calendar, or what point in price, do the funds start unwinding their short positions. I am not going to tell them when we reach that point, they are going to tell me.”

Some top traders suggest little hope for near-term bulls. “Large speculators will likely be employing any price rallies toward the $7 region as an opportunity to add to existing short holdings. By and large, a short-term bearish stance appears justified for another few weeks until the tropical storm season becomes a larger factor,” said Jim Ritterbusch of Ritterbusch and Associates.

He went on to say hedge funds that have generally been favoring the short side of this market during the past spring will likely require a significant weather event to induce them away from the short side. If a significant weather event doesn’t appear, “the market will eventually need to acquire support from production curtailments or from attractive prices vis-a-vis a strong heating oil market,” he said.

Weather bulls will have to look to the far West for a significant weather event at least in the form of supportive heat-driven gas consumption. The Weather Channel (TWC) reported that more than 20 date-specific record highs were set Monday in the West, with even more expected each day this week. Tuesday was no exception, particularly in the Southwest.

“Excessive heat watches and warnings are posted for parts of the desert in Arizona, southern Nevada and Southern California. Highs will be in the 120s in the Colorado River Valley Wednesday and Thursday, with Death Valley in the high 120s; 100-plus readings were expected to be common on Thursday over the Intermountain West, with the best chance of widespread record highs being broken then,” the forecaster said.

In sharp contrast are the far more temperate conditions in the East. Highs will remain in the 60s and 70s over New England and much of New York through the weekend, with 80s possible in the Megalopolis Friday and Saturday, TWC reported.

Due to the Independence Day holiday, the Energy Information Administration storage report for the week ended June 29 will be released on Friday between 10:30 a.m. and 10:40 a.m. EDT.

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