Continuing rises in heat levels in many market areas and the furtherance of screen support (the September natural gas contract extended into its seventh day a run-up that had begun on the previous Tuesday with the August contract set to expire the next day) kept cash prices on the rise Tuesday. Double-digit increases ruled at all points, with gains being measured from about 15 cents to half a dollar.

It seemed unlikely that cash has reached its peaks yet this week. Although a cold front will bring some relief Wednesday to the sparsely populated Upper Plains area and the northern Rockies states are expected to see highs in only the 60s, hot temperatures will remain about where they were or go even higher in other sections of the U.S. and Eastern Canada. In addition, the screen shot up another 22.4 cents Tuesday following a negative beginning.

Although many considered the crude oil futures market’s dollar climb Monday to be an overreaction to the death of Saudi Arabia’s King Fahd, crude for September delivery rose another 32 cents as supply worries failed to subside. It was pointed out that Fahd’s successor, his half-brother Abdullah, had effectively been running the country’s monarchy government for the past decade since Fahd had a stroke, so little policy change could be expected for now.

Another roiling factor in crude markets was a report by China predicting 3% growth in oil exports and a 6% increase in domestic consumption this year.

One source suggested that in addition to the turnaround in oil products’ price direction, the news that the National Oceanic and Atmospheric Administration (NOAA) had raised its forecast for 2005 Atlantic hurricane activity to even higher levels than it had predicted in May (see related story) may have taken natural gas futures from negative territory early on to an eventual gain of 20 cents-plus. If NOAA’s latest forecast is borne out, 2005 would qualify as the seventh “hyperactive” hurricane season in the last 11 years.

As of Tuesday, there were several tropical waves or low-pressure systems in the Atlantic and Caribbean Sea, but none were of much concern to offshore producers at that point.

However, Peter Bryant, president of marketing firm TBCConFuels in Houston, said that with no threatening hurricanes right now, he didn’t think the NOAA report was much of a factor in pushing futures higher. “I’m not discounting the NOAA report,” he said. “It’s just that there’s so many other problems around” in energy markets that are more immediate.

Bryant suspected that Nymex traders were getting more on the long side in futures due to reports of coal supply shortages, persistent disruptions in crude supplies and/or U.S. refinery operations, and fears of terrorism attacks against energy facilities. He noted the news Tuesday of a plane crash at the Toronto airport, saying that even though a terrorism connection was unlikely, some people seize on such fears to keep pushing prices higher.

“Our customers are saying, ‘[cash and futures prices] can’t go higher; it’s got to come down.’ I always take that as a sign that prices are going even higher,” Bryant added.

Another marketer in the Upper Midwest also commented on her end-user clients being upset with a market that seems to have no upper limit on prices. “This [gas] market has gone from bad to worse and worse,” she said, adding that “those Nymex traders will take any excuse they can find” for boosting futures. It’s going to be hurting a lot of people with energy prices as high as they are, she predicted. However, the marketer also acknowledged some fundamental backing for the continuing rise in physical gas prices, saying temperatures in her area were peaking in the 90s Tuesday.

Analyst Agbeli Ameko with First Enercast Financial is predicting a storage injection of 45 Bcf to be reported Thursday for last week. “Weaker than average storage injections so far this summer have continued to erode the surplus over the five-year running average,” Ameko noted. A factor limiting price gains is the extended break between tropical storms, he said, but “although this break favors Gulf production, it offers no precipitation relief to cool down summer heat.”

Citigroup’s Kyle Cooper said his final estimation for the storage report for the week ending July 29 is a build of 40-50 Bcf.

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