The combination of softer crude oil prices and forecasts calling for moderating temperatures were enough to keep the bulls corralled Monday as the natural gas market eased from Friday’s 30-month highs. Monday’s price softness led September futures to a low of $9.38, but buyers stepped in and the contract closed for the day at $9.54, down 4.8 cents for the session.

For many traders, it was hard not to notice the similarities Monday between natural gas and crude oil futures. The latter tumbled from its all-time commodity peak at $67.10 Friday to trade below $66 Monday. However, just like its hydrocarbon brethren, crude oil trimmed its losses at the close as traders covered intraday shorts. September crude finished at $66.27, down 59 cents for the session.

Also impacting natural gas Monday was the latest offering of weather forecasts suggesting that at least some parts of the country will get a reprieve from an extremely hot August weather pattern. According to the latest six to 10-day forecast released Monday by the National Weather Service, below normal temperatures are predicted over parts of the Central Plains, the Great Lakes and the Midwest for the Aug. 21-25 timeframe. And while that may ratchet down air-conditioning demand in those areas, the nation as a whole is still in the oven, with above-normal readings expected in the Northeast, the West and Florida.

For Mississippi-based analyst Stephen Smith, it will be this overall heat that will drive continued high cooling degree day tallies and low storage injections. “If CDDs for the next two weeks turn out as currently projected, we expect [the storage surplus] to decline by another 60 Bcf by Aug. 26,” he wrote in a note to customers Sunday. Specifically, Smith looks for a 48 Bcf injection for the week ending last Friday (to be released this Thursday).

If realized, a build of this magnitude would compare bullishly versus Smith’s 10-year injection norm of 70 Bcf (1994-2003). According to the EIA, the five-year average injection for this week is 61 Bcf and the year ago analog is a 77 Bcf build.

However, astute traders will tell you that while you can let fundamental factors guide your trading bias (upside or downside), you should allow technical trading tools to dictate when to enter and exit a trade. “Gas came close to our $10.00 objective on Friday before faltering,” noted Craig Coberly of GSC Energy in Atlanta. “This topping action turned the daily stochastic oscillator down… and leads me to the tentative conclusion that the short-term trend has likely turned down.”

For confirmation, Coberly would like to see a close in October futures below support at $9.33. That contract has tracked September pretty closely lately and closed Monday at $9.561. On the upside, Coberly admits that a trade (in Oct) above $9.93 would “invalidate any ideas that the short-term trend was down.”

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