Making further strides away from last week’s gains, July natural gas futures on Tuesday worked lower for the second consecutive session as questions continued to arise regarding whether the summer would be as hot as once expected. After carving out a low of $6.470 on the day, prompt month natural gas ended up settling at $6.502, down 39.1 cents.

Combined with Monday’s 29.2-cent loss, July natural gas already has shed 68.3 cents for the week, a remarkable departure from last week’s gains. During the previous week, the July contract gained $1.013 on a bullish storage injection and warmer temperatures in the Northeast.

“The natural gas market is all about the weather. I really think the expectations for moderating temperatures was responsible for the weakness of the last two sessions,” said a Washington, DC-based broker. “While we have had a couple of hot days, it looks like we can kiss that heat goodbye over the next few days. Looking at the weather in DC, which gets as hot as anywhere else, we are going to be in the low to mid-80s going into July 4th. The National Weather Service maps are also showing normal to below normal temperatures in the South. We are really looking at a weather-driven market right here.”

Paraphrasing recent remarks from AccuWeather meteorologist Joe Bastardi, the broker said the concern is that expectations for a hot summer won’t come to fruition, much like predictions of colder than normal weather last winter proved to be false. “We have these very extreme weather predictions and Mother Nature occasionally deals you the absolute opposite hand,” she said. “We are almost at the end of June, and a couple days aside, it has been delightful temperature-wise.”

The broker said things seemed to be pretty quiet Monday in terms of natural gas trading. “I only had a couple of sales here. My natural gas book has been pretty quiet. The [Nymex] floor also sounded somewhat quiet,” she said. “We have been stuck within this range for a while. We have been here before, so it is not new territory. Those who were excited about these levels last time bought it and those who weren’t had their hands in their pockets looking for prices to go lower anyway.”

The broker noted that the $6.00-6.50 area had been a major support trading range for the July contract, so there is “no reason that the market can’t go back in there.”

Prior to Tuesday’s trade, some market technicians suggested that natural gas futures may be on the verge of a five-wave advance. The advance “will hold its form if our minimum support targets of $6.635 or $6.400 can push prices higher,” said Walter Zimmerman of United Energy. He said that in his assessment the recent price action can be considered “bottoming.” “Our intermediate and long term trends are bullish given the proximity to a seasonal bottom in all the Nymex markets,” he stated.

Short-term temperature outlooks show New York City will stay warm, but Chicago will cool. The Weather Channel forecasted a high in New York City of 86 degrees Tuesday with minor mid-week variations before reaching 86 degrees on Friday. The normal high for New York is 78. In Chicago, Tuesday’s high of 76 is forecast to rise to 80 by Friday. The normal high in Chicago at this time of year is 82. The forecaster also reported that there are no imminent tropical threats in the Atlantic, but clusters of showers and thunderstorms extend from the Bahamas southeastward into the eastern Caribbean.

Last week the Federal Reserve Chairman weighed in on natural gas prices. On Thursday Federal Reserve Chairman Ben S. Bernanke said that natural gas prices will stay higher than the $2 range that they enjoyed for most of the 1990s because of falling production and a lag in the implementation of liquefied natural gas imports.

“High prices of natural gas reflect strong demand and diminished supplies,” Bernanke told the Economic Club of Chicago. “Domestic production of natural gas has not kept up. Last year, U.S. production was 7% below its 2001 level, with less than half of that decline reflecting the impact of hurricanes Katrina and Rita.” He added that prices may moderate within the next decade if North American fields — currently off limits to producers — are developed.

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