Despite a second straight day record electricity demand, and spiking New York City physical gas prices, natural gas futures traded quietly sideways Tuesday, as neither bull nor bear was willing to influence a move in either direction. On its first day as prompt contract, September slipped 1.4 cents to finish at $2.891, just 0.1 cents above its opening trade for the session and smack-dab in the middle of its $2.85-93 trading range. At 86,242, estimated volume was moderate to light.

“If natural gas prices were going to rally, they had plenty of reason to do so [Tuesday],” a trader told NGI. “Temperatures were up and forecasts call for more of the same. Crude was moving higher, and storage estimates were moving lower. Everything pointed to higher gas prices.” His point is well made. Following the first suicide bombing in Israel this month and amid renewed fears that the U.S. is closer to taking action against Iraq’s Saddam Hussein, U.S. crude oil prices spiked Tuesday. At the closing bell, the September crude contract was up 81 cents at $27.36 bbl.

Also of bullish influence Tuesday was the ratcheting down of injection expectations ahead of Thursday’s Energy Information Administration storage report. Citing weakening natural gas prices over the last couple of weeks, Thomas Driscoll of Lehman Brothers in New York has lowered his refill estimate to 55 Bcf from the 65 Bcf he predicted last week. “We speculate that [lower prices] will begin to lead to a recovery in natural gas demand,” he wrote in a research note Tuesday. Last year at this time the market injected 68 Bcf into the ground, and the five-year average calls for a 56 Bcf increase, he added. Last week the market dropped 15 cents Thursday when the EIA announced a hefty 64 Bcf injection for the week ending July 19.

However, if there is a time of the month for the market to ignore fundamental factors, this is it. Sources agree that economic details such as weather and storage tend to get pushed aside during the last couple days of the month, as traders wait and see just how short or how long the physical side of the market is for the month to come. In lieu of that fundamental analysis, traders typically turn to technical features to give them their next price clues. However, technicals were inconclusive Tuesday, as the market remained safely in the middle of its recent $2.76-3.11 trading range.

Support for September exists at $2.80-83 ahead of more concerted buying down at the aforementioned continuation chart low of $2.76. On the upside, chartists see resistance layered first at Tuesday’s high of $2.93, followed by psychological selling in conjunction with the $3.00 level. Should short-covering take hold, the market has additional resistance at Monday’s $3.11 continuation chart high.

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