Heat

There were no blizzards or major heat waves in the near-term sights of the weather radar, but spot prices managed to rebound by large amounts across the board Tuesday from the depths to which they had sunk on Friday. They did have support from both Friday’s 22-cent futures gain (which broke a string of downward sessions) and the return of industrial load from the extra losses it incurs on a holiday weekend.

Although no major heat waves were on the weather radar outside the continuing one from the south-central U.S. through the Southwest, modest warming trends in the Midwest and parts of the Northeast and South, along with the previous day’s August futures increase of 8.8 cents, were enough to generate price increases across the board Thursday.

Gains, concentrated in the Midcontinent, Northeast and much of the West, modestly outnumbered losses elsewhere Monday as heat across the southern third of the U.S. continued to wrestle with relatively moderate conditions to the north for primary market influence. The previous Friday’s 3.5-cent loss by August futures and the return of industrial load after the weekend were other opposing price factors.

Light weather-based demand kept cash prices falling at nearly all points Friday as forecasts of slightly higher heat levels in the South and Midcontinent were offset by a continuation of moderate-to-cool springtime conditions in most other regions. The weekend decline of industrial load was another bearish factor, while as expected, the previous day’s 4.4-cent gain by July futures had essentially no impact on the physical market.

Although record-setting heat levels were due to end after Tuesday in the Northeast and weather-based load was not expected to be remarkable elsewhere except possibly in Western Canada and the desert Southwest, prices were up at a solid majority of points Tuesday. The overall cash market firmness was also able to shrug off a 4.4-cent decline by May futures a day earlier.

Nearly all points rallied Monday due to a tropical storm in the Gulf of Mexico (GOM) and torrid heat levels continuing across nearly all of the southern half of the U.S. The modest 3.3-cent gain Friday by August futures and the return of industrial load from its weekend downturn were other factors in the overall bullishness.

Buoyed by forecasts for significant heat in the Southwest and the arrival of the first tropical storm of the 2008 Atlantic hurricane season, July natural gas futures pushed above $12 in Monday trade to record a high of $12.203. However, the momentum could not be sustained as the prompt-month contract dropped to close at $11.969 — still good for a 26.6-cent gain over Friday’s finish.

Rep. Edward Markey (D-MA) last Wednesday unveiled legislation that offers a cap-and-invest system to reduce heat-trapping greenhouse gas (GHG) emissions in the United States.

Natural gas bulls kept the heat on futures prices on Friday as the June contract pushed higher ahead of the holiday weekend to close at $11.857, up 16 cents from Thursday’s finish and 76.3 cents higher than the previous week’s close. With an $11.864 high on the day, the prompt-month contract set a new high mark for the up move that began back in August 2007.