As if crashing oil prices, fresh weather forecasts and the release of storage data were not enough Wednesday, the natural gas futures market was rocked again Thursday by a report of a pipeline rupture in the Gulf of Mexico (see related story this issue). Although the accident has since been dubbed a non-event, it produced a dramatic, if brief, spike in prices as commercial traders loaded up on contracts only to dump them just minutes later.

After cresting and plummeting to $4.20 and $3.98 respectively injust 40 minutes yesterday morning, the August contract limpedlazily sideways and then a little lower to finish at $4.066, a4.3-cent decline for the session. Comparatively, October andNovember contracts sank 8.1 and 6.6 cents lower, respectively,yesterday in an apparent make-up following Wednesday’s session inwhich they reached their 30-cent lock-limits down.

As traders try to catch their breath today after anaction-packed couple of trading sessions, they might turn theirattention to the potential for some mildly bearish fundamental newsin the weeks to come. “We are still without compelling bullishshort term fundamentals,” said Tim Evans of New York-based PegasusGroup. “The weather outlook is not that bullish in the short run…It’s not that it’s clearly bearish, but it maybe bearish comparedto record heat last July. Looking back at last year, Evans pointsout that the market had a difficult time injecting gas into theground during July, and that could pave the way for this year’sinjections to make up some much needed ground against the 466 Bcfyear-on-year deficit.

According to the American Gas Association, the market added 59Bcf, 78 Bcf, 41 Bcf, 26 Bcf, and 45 Bcf or an average of 50 Bcf inthe five weeks that spanned the month of July last year. In thefive previous years, the market injected an average of 75 Bcf aweek during that same period.

However, while Evans remains cautiously bearish, Ed Kennedy ofMiami-based Pioneer Futures wants someone to show him the weakness.”We have tested [$3.80-95] three times and each time the market hasbounced back. I will not be sold on this move lower until we get aclose below $3.95.” For Kennedy, the $3.95 level is a key level inboth Market Profile and Elliot Wave technical analysis systems.

Meanwhile, Kennedy is somewhat less concerned about the promptmonth closing below its 40-day moving average for the first timesince mid January yesterday. “[August] closed only 4 ticks below[its 40-day average] today. If we get a bounce tomorrow, it will behard not to be a buyer,” he admitted.

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