Picking up where last week ended, July natural gas futures continued to explore higher on Monday, breaking through the $7.02 high point from last week to notch a new high of $7.24.

The gain was attributed to warmer weather that flooded much of the country over the weekend and on Monday, providing support for the bulls to continue their run higher. July futures settled at $7.122, up a whopping 24.2 cents on the day.

“All of a sudden, things are extremely bullish,” said Brad Florer, a broker with ICAP Energy. “Everything I am reading is calling for higher [prices]. The momentum has completely turned.”

He noted that the orderly fashion of the downtrend break led him to believe that the shorts were worried that when it turned, it would be fast and there would be a pretty quick exit.

“It was a two-month break lower that resembled what a rally normally looks like,” Florer said. “It was nice, orderly and very structured, but the whole way down it just did not feel like anybody believed it or was really willing to sell hard into the bottom. When bulls finally saw a reason on the chart and some summer heat arrived, I think everyone really jumped back in.”

Noting that it has been a “very strong couple of days,” the broker said he is still bullish, but is not sure how quickly or high July will go. “With the contract high up at $8.04, I think real bulls out here feel that is realistic,” he said. “I am not sure if I am that bullish, but I think this thing has definitely turned and people will be looking to take advantage of any weakness the market gives them right now.”

On the weather front, it appears that summer heat might stick around for a while. The National Weather Service in its most recent six-to-10 day forecast shows a broad stretch east of a line from West Texas to northern Wisconsin as above normal. In the East, only Florida is expected to see below normal temperatures. West of a line from northern Minnesota to eastern New Mexico, temperatures are forecast to be below normal.

Others agree on the outlook for warm temperatures. AccuWeather reported that warm air would surge into the Plains on Monday. As a storm out of the Rockies moves east, warm air will be lifted out of the Southwest and into the breadbasket of the nation. “The heat will begin to subside by the middle of the week as rain and thunderstorms move in from the west,” AccuWeather said.

AccuWeather is more expansive in its six-to-10 day forecast. It predicts above normal temperatures all the way from Arizona to Maine. Florida and portions of the Southeast are to be normal and the Northern Plains and Pacific Northwest are expected to be below normal, the service said.

Weather bulls may get help from funds and managed accounts. The Commodity Futures Trading Commission reported Friday that as of May 31, noncommercials held a net short position of 45,334, slightly more than the 45,023 reported a week earlier. Inasmuch as noncommercials use the futures markets primarily as speculative vehicles, the short position will eventually have to be covered, or bought back. The figures, however, do not reflect the massive short covering rally last Wednesday, which likely reduced their short position. The next report of noncommercial holdings of futures positions will be Friday.

Natural gas futures, which many believe have traded higher in sympathy with crude oil recently, may now have some fundamental and technical basis for the bull move. Traders and market-watchers alike are interested in the impact the first blast of hot weather will have on storage injections. However, because storage inventories are tallied by the Energy Information Administration for the week ending Friday, the market will have to wait until a week from Thursday for the results of this week’s hot air.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.