July natural gas futures retreated Monday as much of the impetus for higher prices in play last week — forecast hot weather and soaring oil prices — dissipated. July dropped 8.9 cents to $12.604 and August dropped 7.9 cents to $12.684. July crude oil fell $4.19 to $134.35.

Longer term, some analysts are focusing on the recent hand-in-glove relationship between natural gas and oil trading. They see the present strong linkage with crude oil prices changing. “Recently there has been an exceptionally strong correlation with crude oil of about .95 to .98 versus a 10-year average of about .80 and over the last three years where there was a large [supply] overhang a neutral correlation,” said Eric Wittenauer, market analyst with AG Edwards, St. Louis.

“With the overhang being corrected, the rush to commodities, and the surge in crude oil prices brought about the strong correlation of the natural gas with the crude oil market to above historical norms. What we may see as the injection season progresses is somewhat of a backing off in that strong correlation to something more moderate, but we still anticipate the natural gas will take something of a cue from the crude oil market simply because of crude oil’s place as the bellwether of the energy complex, but also more broadly of the commodity complex,” Wittenauer said.

He added that the strength of any correlation between natural gas and crude oil going forward would be how the injection season goes. “Right now we are injecting at average levels, and natural gas remains undervalued to crude oil and on a global scale it is undervalued relative to foreign markets. We think natural gas prices will remain supported for the most part and be a better performer than other members of the petroleum complex. In any event we see a lowering of the exceptionally strong correlation with crude oil,” he said.

One factor that could change all that is if for some reason storage was to build more rapidly than expected and an oversupply situation returned. “If you start to build up the overhang again, then the natural gas market will lag, but if there are normal to slightly below normal injections, then look for natural gas to outpace the [petroleum] complex on an energy equivalents basis,” said Wittenauer.

The Weather Channel (TWC) reported that temperatures were expected to ease by later in the week. Chicago’s Monday high of 87 was forecast to drop to 79, its seasonal norm by Friday, and New York City’s Monday high near 100 was predicted to fall to 84 by Friday. The normal high for New York City this time of year is 76.

The tropical Atlantic Basin remains quiet, TWC said.

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