Buoyed by the one-two combination of hot weather forecasts and higher cash market prices, particularly in the Northeast, natural gas futures prices moved higher Wednesday on fresh commercial buying mixed with light speculative short covering. After trudging methodically to a $3.04 high at 1 p.m. EDT, the September contract fell in the last 90 minutes of the session as traders positioned themselves ahead of this mornings release of the weekly gas storage report. The prompt month closed at $2.954, up 6.3 cents for the day, but 8.6 cents off its daily high.

With traders still trying to catch their breath after triple-digit heat sent cash prices as high as $11 in New York this week, the National Weather Service and private weather forecasters showed no mercy Tuesday and Wednesday in releasing forecasts calling for more of the same for the foreseeable future.

In its end-of-July forecast, Weather Services International (WSI) called for a continuation of above normal heat for the upcoming three months for much of the United States, including the East, the Southwest, Pacific Northwest, California and the Rockies (for full report, see Daily GPI, July 31). “In August, above normal temperatures will be the rule for most of the United States, with the exception of the Pacific Northwest, northern New England and Texas,” WSI said.

In its six to 10-day outlook the National Weather Service agreed, calling for above-normal temperatures to cover a large swath of the country from the Rockies eastward for the Aug. 6-10 timeframe. Only South-Central portions of the country from Arizona to Alabama are expected to see below-normal temperatures during that five-day period.

Several cash traders admitted to being a bit perplexed by the seemingly disjointed nature of the natural gas cash and futures markets Wednesday. While cash prices leaped higher to notch their best values early in the morning trading session, Nymex climbed slowly throughout its trading day to peak early in the afternoon. NGI’s Daily Henry Hub averaged $3.04 Wednesday, well off its early morning high at $3.08. Meanwhile the fall in Northeast prices was more dramatic with Transco NY delivered prices dropping from a $11 high trade down to $4.50. NGI’s average on Transco Zone 6 was $7.07.

However looking ahead, gyrations in the cash market as well as revisions of the latest weather forecasts will take a back seat to the release of Energy Information Administration’s natural gas storage data Thursday morning. The narrow range of expectations ahead of that report is for a 55-60 Bcf injection, which would fall short of last year’s 68 Bcf build. However, not everyone believes storage increased by that much last week. Allowing that the EIA could issue a correction following the previous week’s higher-than-expected 64 Bcf refill, Jay Levine of Advest Inc. calls for a 45 Bcf addition.

In daily technicals, September has a key “pivot point” at $2.91, which corresponds to the mode of the normal distribution (bell curve) the market has traded over the past four weeks, said Tom Saal of Pioneer Futures in Miami. On the upside, resistance is at the top of that range at $3.11. On the downside, support at $2.80 forms a possible floor. Tim Evans of IFR Pegasus in New York looks to the upside and hopes to take advantage of the up-move with a $2.96 long position. A sell stop at $2.84 will limit his exposure should the market prove him wrong.

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