Just when the impact of Hurricane Claudette was quickly fading away, Tropical Depression Six entered the scene with route projections into the eastern Gulf of Mexico. The storm may have been a catalyst for the market to begin a correction Monday. Significant short covering Monday morning and technical buying interest in the afternoon propelled the August contract to a high of $5.18 and left it up 8.5 cents for the day at $5.107. The daily low was $5.030.

Cythia Kase of Kase & Co. said on Sunday that the market already was technically poised for a correction. “Statistically, odds are approximately 75% that the correction will surge to the $5.30 (plus or minus 5 cents) area, but are only 30% that the correction will rise toward $5.80, which is the major upper objective for the current market pattern,” she said. “If prices do not move up to at least $5.25 then we will consider that the setup for the correction has failed,” she said, adding that if August does not make it to $5.25, “a dramatic move to the downside becomes much more likely.”

Although prices are headed back up currently, Tim Evans of IFR Pegasus said he doesn’t see enough fundamental support to sustain a rally. “Cooling degree day accumulations for last week came in somewhat less than expected, and we’re bumping our estimate for Thursday’s DOE report from 80-85 Bcf to 85-90 Bcf as a result.”

Evans also isn’t too impressed with Tropical Depression Six. The National Hurricane Center said Monday at 2 p.m. that the storm, which was located about 70 miles southeast of Martinique and moving West at 23 miles per hour, lacked a well defined low level circulation and probably would be downgraded to an “open tropical wave.”

The storm “may be helping to spark some of today’s short covering, although the track of this storm looks like it will both hinder its development into a major storm due to the interaction with the islands of Hispaniola and Cuba as well as target the Eastern Gulf of Mexico, where there is little natural gas production,” said Evans. He noted the storm also will bring cooling rains to the Southeast, producing a bearish impact on cooling demand in the market.

“Today’s rise may be constructive toward the establishment of a longer term base of support, but we still can’t rule out minor new lows with spot support at $4.69, $4.44 and even longer term uptrend support at $4.10 as possible targets.”

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