Sparked mostly by a round of crude weakness and U.S. dollar strength, August natural gas futures plummeted following the long holiday — breaking beneath psychological support at $13 along the way. The prompt-month contract recorded a low of $12.874 before going on to settle at $12.977, down 60 cents from Friday’s finish.

As the U.S. dollar’s value increased early Monday, crude futures prices declined as reports circulated that the record commodity prices might be slowing European economic growth. August crude on Monday recorded a low of $139.50/bbl before settling the regular session at $141.37/bbl, down $3.92 from Friday’s close.

“Monday’s action was like a scene from a movie where we find out the seemingly invincible villain can actually bleed. People are saying, ‘You mean crude oil can actually go down?’ I think the price action in crude oil certainly represented some vulnerability…and not just directly in the crude oil market,” Citi Futures Perspective analyst Tim Evans told NGI. “I think it puts a chink in the armor of the bullish premise that the perpetually high petroleum prices were going to pull the natural gas market up by its chinstrap. That premise is now in question. It now turns out that there might be a scenario where crude oil falls to narrow the gap between natural gas and the liquid fuels instead of natural gas rising to a comparable value per Btu. I think the day will come when we see at least a substantial narrowing of the price differential, but I am not necessarily saying that has to happen at $20 natural gas. It could just as well occur at $7 natural gas and $70 crude oil.”

Evans said action on the U.S. dollar was interesting Monday. “The dollar was strong early Monday, but ended up virtually unchanged on the day,” he said. “We also had the stock market careening to a new low Monday, which I think is getting to the point where it is highlighting a more significant economical slowdown. When we’ve killed off the last consumer, then it is going to be difficult for energy prices to rise. It is all very nice that oil and gas producers are basically winning this game of Monopoly we have here, but what happens when nobody else is left in the game and they are left rolling the dice on their own? It is not as much fun when you are playing the game alone.”

While Monday had a bearish feel, the analyst said he wouldn’t get the fur and claws out of storage just yet. “I do think this is a more of a warning not to get too comfortable on the long side of the market than it is a full commitment to a reversal to the downside. It could develop into something more but we don’t have that confirmation just yet.”

Going into the long holiday weekend weather bulls thought that what was Tropical Storm Bertha might evolve into a threatening hurricane. Bertha has since morphed into a hurricane, but if National Hurricane Center projections are correct, indications are that its direction is likely to take it to the northwest toward Bermuda, missing Gulf of Mexico infrastructure.

“We still believe that Bertha will now stay south of a large ridge of high pressure located across the central Atlantic. The question with her track is, what happens when she moves west of the ridge axis?” queried AccuWeather.com meteorologists Matt Keefe and Brian Wimer. They added that often tropical systems will be steered by the backside of the ridge to a more northerly heading and eventually even northeasterly. “When and where does this northerly jog in track occur? The current thinking is this turn does not happen in the short term, at least through midweek.”

John Kocet, another meteorologist with AccuWeather.com, said the storm is too far out to discern the track with any real certainty. “Though there is a greater chance that the storm will eventually turn away from the East Coast, it’s far too premature to sound the all clear,” he said.

Weather bulls also will have to wait for warm weather, at least in populous Midwestern and eastern energy markets. In his 10-day temperature outlook meteorologist John Dee said “the week ahead looks to keep any pronounced heat out of the Midwest and eastern U.S., with temps to run below average for much of the week. The western U.S. will hang onto its heat for much of the week ahead and will continue to lead to high demands for cooling energy.” By the end of the week Dee expects the jet stream to flatten out and lift “temps in the Midwest and eastern U.S. to at least average levels, perhaps a bit above average,” he said in a morning report to clients.

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