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The natural gas futures market turned lower Monday as bears won Round One of what is shaping up to be a compelling battle between short- and intermediate-term weather outlooks. As is often the case on the first trading day of the week, the price action began in the overnight Access trading session. By the time the open-outcry trading session commenced at 10 a.m. EST, bulls were already faced with having to climb out of a deep deficit.

After looking a little like a deer caught in the headlights in the minutes immediately following the storage report (78 Bcf injection), the natural gas futures market bolted higher Thursday as technical market features trumped an increasingly bearish storage situation. The September contract carved out a new, one-month high at $5.34 by 11:30 a.m. ET, and then slid back a few cents in the afternoon to close at $5.275, up 15.6 cents for the session.

Despite revised weather forecasts calling for a warm-up east of the Mississippi, natural gas futures shuffled higher Monday as traders continued to hedge for the possibility of a technical short-covering rally. The buying was concentrated in the morning hours and by 12:20 p.m. EST the February contract had already reached its peak for the day. However, only light selling was seen throughout the afternoon and as a result, the February contract managed to hold onto some of its morning advances. It finished at $2.25, up 4.6 for the session, but 7.5 cents off its high trade.

The chances are good that a major constitutional question regarding whether federal bankruptcy laws trump a California state law restricting the sale of private-sector utility assets will emerge from the comprehensive Pacific Gas and Electric Co. bankruptcy case, in which the utility filed its reorganization plan last Thursday. Not withstanding this potential turn, a San Francisco bankruptcy attorney said Monday if it were not for the state-regulated utility assets involved, the PG&E reorganization plan would be “fairly typical in which certain assets are sold or otherwise financed to pay creditors.”

Acknowledging that federal regulators hold most of the trump cards related to lowering natural gas costs, the California legislature nevertheless has produced four bills aimed indirectly at cutting consumer costs by developing more underground storage (AB 78X), producing more in-state gas supplies (AB 73X), eliminating anti-competitive tariffs (AB 23X), and shortening new pipeline permitting processes (AB 42X).

Acknowledging that federal regulators hold most of the trump cards related to lowering natural gas costs, the California legislature nevertheless has produced four bills aimed indirectly at cutting consumer costs by developing more underground storage (AB 78X); producing more in-state gas supplies (AB 73X); eliminating anti-competitive tariffs (AB 23X); and shortening new pipeline permitting processes (AB 42X).

Feeding off losses achieved during the largest single day dropin Nymex history Tuesday, natural gas prices continued loweryesterday as bear traders looked past supportive storage numbers tofocus on a warming trend expected later this week. The Februarycontract was dealt the most severe blow, tumbling 17.5 cents to$8.189. Losses were far less pronounced in the out-months asevidenced by the 12-month strip, which only slipped 5.1 cents to5.716.

After drifting sideways for much of the session yesterday,natural gas futures were hit with a late round of selling upon therelease of fresh industry supply data. The May and June contractswere hit the hardest, each tumbling 4.3 cents to finish at $3.055and $3.075 respectively. Estimated volume was average with 78,378contracts changing hands.