August natural gas futures treaded water Friday in spite of ongoing oppressive heat and trader perceptions that the market may have put in an important seasonal low. At the close August had risen 0.4 cent to $4.399 and September had added 0.8 cent to $4.370. September crude oil gained 74 cents to $99.87/bbl.

“For the moment there is plenty of supply, but at some point you would think it’s just a matter of getting the stuff to market. We are using it as fast as we can get it,” said a Washington, DC-based broker who was sweltering under the severe heat and humidity choking the East Coast. “Sometimes conditions like that can push the price up, but we have been watching power prices at the PJM West Hub and they have just been lying flat.”

In spite of the weak market response to the brutal weather conditions of the East and Midwest, “we are moderately bullish on natural gas,” he said. “July is normally a seasonal bottoming period, and we didn’t break the $3.80 level this last time down. I don’t think we will be on a runaway train back up to $9, but I do think we are likely to move higher in the intermediate term, not just day to day, or week to week, but in the next couple of months.

“I would tend to think the last low we made [$4.064 on July 7 ] tends to hold as a pretty significant seasonal low. Our Elliott Wave analysis shows the market has now completed an ‘ABC’ correction following the impulsive move higher in early June. [July futures peaked at $4.983 on June 9]. We are now back into something else; whether it is another ‘ABC’ or whether it turns out to be an impulsive wave has yet to be determined.

“All of November, December, January, February and most of March were all ABCs back and forth. The market didn’t get impulsive until the advance from March into June.

“The seasonal factors in natural gas tend to be pretty strong since you don’t have that many exogenous factors hitting it. With all the data that’s known to the market and that report from scientists at Penn State that says the Marcellus is just going to keep on pumping, pumping and pumping, the market is not falling back to $3.80. Our natural gas buyers have been quiet, but I think it’s just a market that grinds higher. I look for a test of $4.80 again.”

After August’s 10-cent drubbing Thursday other analysts were not quite ready to call a seasonal low. Some still see fundamental factors supporting the market, but technical indicators suggest lower prices. “The market is now back into a ‘no man’s land’ where risk-reward ratios are unfavorable for either a long or short position even over the near term,” said Jim Ritterbusch of Ritterbusch and Associates.

“Technical indicators would favor further price slippage back down into the $4.20-4.25 area, while fundamentals would appear amenable to another up move into the $4.50-4.60 zone. These positive fundamentals are still taking the form of warm temperature forecasts that extend well into the first week of August. However, consensus of expectations has shifted toward some moderation by the middle of next week that should translate to some decline in EG [electric generation] demand.”

According to AccuWeather.com, Friday may have been the hottest day of the summer for eastern points still getting grilled under a dominant high-pressure ridge. “Major heat that has been smothering major metropolises across the Midwest [last] week is now in full swing along the East’s I-95 corridor. One piece of good news is that a slow-moving cold front will slowly clear the major cities of the Northeast by the end of the weekend, cutting back at the most extreme heat and humidity. The relief will be more noticeable at night when lows fall off into the mid to lower 70s,” said Meghan Evans, AccuWeather.com meteorologist.

The heat wave was to peak Friday for the major cities of the Northeast with highs hitting or even surpassing the 100-degree mark in Boston, New York City, Philadelphia and Washington, DC, Evans said.

AccuWeather.com predicted that both Chicago and Philadelphia would see high temperatures this week in the upper 80s to low 90s, unadjusted for humidity.

In its weekly rig count survey oil-services titan Baker Hughes reported that rigs drilling for gas rose by four to 889, well behind the year-ago level of 982. Horizontal rigs, the ones dominant in such plays as the Marcellus, Haynesville, and Bakken shale oil plays were up by 16 to 1,102, significantly higher than the 858 a year earlier. The total U.S. rig count increased by 11 to 1,916, up from 1,585 a year ago.

At 11 a.m. EDT Friday the National Hurricane Center (NHC) reported that a diminishing post-Tropical Storm Bret and Tropical Storm Cindy were in the Atlantic and headed to the northeast and not a threat to the U.S. NHC said it was also following a tropical wave 325 miles east of the Windward Islands. It gave the wave a 20% chance of reaching tropical cyclone status through Sunday.

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