Continuing the downward momentum from Friday, the July natural gas futures contract dropped 18.1 cents on Monday to close at $6.339. Rumors of a break from trading with crude futures appeared false for the time being, as July crude fell as well, closing $1.12 lower on the day at $37.63.

The natural gas prompt month declined steadily through morning trading, hitting a low on the day of $6.30 just before 1 p.m. (ET). The contract made a feeble attempt at a rebound in afternoon action before closing lower.

Some traders thought that weather would begin to play a strong enough role to influence natural gas futures alone, breaking the crude relationship. Forecasts over the last couple of months have been calling for warmer than normal temperatures over much of the U.S. this summer, which began Monday. So, far, these conditions appear to be materializing, as spring 2004 proved to be pretty hot.

Joining a number of other forecasters, Andover, MA-based WSI Corp. said Monday that it is looking for the July-September period to average warmer-than-normal temps in most locations, with the exception of the northern and central Plains, which will experience cooler than normal weather (see related story).

Weather 2000 warned last week that unless you’re in the North-Central/Midwest/Northern-tier, there is very little if any cool relief in sight, with warmth and mugginess often compounding over streaks of four to six days (see Daily GPI, June 21).

However, the National Oceanic and Atmospheric Administration’s latest six-to 10-day outlook, which covers the June 27-July 1 timeframe, calls for below normal temps for much of the Great Plains across the Midwest and into the Great Lakes areas and northeastern states. Warmer than normal temperatures are expected in Florida, southern Georgia, Idaho, Washington, Oregon and northern areas of California and Nevada, while the rest of the country will experience near-normal conditions.

Foreseeing the future pretty well, GSC Energy’s Craig Coberly called Monday’s continued downturn in futures. “I’ve been counting the rally from the June 9 low as a corrective rally within a larger decline,” he said in a Monday morning note. “Under this premise, the rally has gone about as far as is should and prices should turn lower. Since the intra-day stochastic oscillators turned down and crossed over on Friday, it’s possible the decline has resumed.”

Assuming prices turned down Monday, Coberly looked for a decline to at least the Gann support line rising from the Feb. 24 low, with a support line ranging from $6.16-6.20 this week.

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