After being hit with a devastating combination of bearish newsFriday afternoon and Monday morning, traders at the New YorkMercantile Exchange had little choice when the market reopened. TheJuly contract took it on the chin, gapping lower on the open beforeposting a 7.1-cent decline to finish at $2.237. The August contractdid not fare any better, slipping 6.9 cents to $2.268. Estimatedvolume was solid with 78,116 contracts changing hands.

Traders were quick to point to “disappointing” six- to 10-dayweather forecasts released by both the National Weather Service andprivate entities as a major reason for the decline. “There was talklate last week of a dome of high pressure expected to build overthe Midcontinent and Midwest that would keep things hot. Now itlooks like seasonal temperatures and even some rain relief is inthe forecast,” one trader said.

While the National Weather Service expects above normaltemperatures for much of the upper Midwest and Northeast, it alsolooks for areas of below normal temperatures in the Southeast andover a large area of the West.

“The large electrics, sensing demand is not going to be whatthey had anticipated, came out as heavy sellers in the OTC market[Monday]. Then once the futures market opened locals added to thedownward pressure and in the process became very short,” anothertrader offered.

However, the weather was not the only thing on traders’ radaryesterday. Several sources said they were becoming increasinglyconcerned with the large speculative long position held by thenon-commercial segment of the market. In its Commitments of Tradersreport released Friday, the Commodity Futures Trading Commissionreported that the non-commercial segment of the market was longover 51,000 as of last Tuesday. “Now that the market has moved backbelow the 40-day moving average, it is likely they will start toliquidate those positions,” a New Jersey analyst noted.

What will it take to arrest the latest sell-off? Scale downbuying by trade paper, who will be eager to pick up length below$2.20, a Houston trader said.

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