After Wednesday’s 9.8-cent gain following what was construed asa bullish report on gas storage levels, futures rallied yesterdaywith July posting a 20.7-cent gain to a new contract high of$4.463, which was 1.7 cents off its daily high of $4.480.

Bullish fundamental factors, although largely unchanged, stillare significant and include strong cooling demand because of therecord heat in California and the Southwest and the continuing lowinventory situation in the nation’s gas storage facilities. Inaddition, the National Weather Service’s monthly temperatureoutlook for July, which was released yesterday, shows expectedabove normal temperatures over at least two-thirds of the country,including the Mid-Atlantic, Southeast, Midcontinent and Pacificregions.

“It’s about 106 degrees in San Francisco,” noted Cliff Wilson,technical analyst at Kase and Company. Although the fundamentalfactors are compelling, “we don’t really judge the market callshere on the basis of fundamentals. We’re massaging data on atechnical basis and just using our own developed in-housesoftware.”

“Wednesday we got long at like $4.20 on July gas. We had somereason to leave some of that at about $4.35 today with a 15-centgain and then get back in at $4.40 on into the close today. Sowe’re still long and holding. We’ll see what tomorrow brings. Iwouldn’t be surprised if we get exit indications tomorrow. It’srare these days that we’re in a trade more than two days.”

Despite its large move upward, the futures market remains in abroad sideways trading pattern with $3.80 frequently cited as majorsupport and the all-time high for a near-month contract at $4.60 asresistance. However there are several narrower trading ranges,according to Rafferty Technical Research, and July broke across andsettled above one key trend line yesterday at about $4.42.Prospects look good for a continuation of the increase tomorrowmorning. Prices were up in Access trading yesterday evening by 1.2cents to $4.475 as of 6:30 p.m. Minor resistance is seen at $4.25and then $4.090.

“The $4.48-$4.49 area may not be the end of the market’sadvance, but we see the uptrend off Wednesday’s low as fragile witha swing back beneath failed resistance at $4.38 establishing asignificantly different market tone,” the Pegasus NatGas Reportstated. “An earlier low at $4.285 would become the next objectivewith followthrough beneath that level tipping the balance even moretoward the key $4.09 low from Wednesday’s session. Once beneaththat level we see risk of one more look at the $3.80-$3.83 lows ofthe past two weeks.”

The economic impact on the low storage situation got a littleworse yesterday with a reduction in the summer-winter price spread.The outer months did not climb nearly as high as the near months.July at $4.463, for example, is now only 0.7 cents less thanDecember at $4.470. There obviously is no reason other thancontractual storage injection requirements right now to put gas inthe ground for winter when it costs up to 10 cents a month to storeit.

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