Buoyed by forecasts for a warm-up in key eastern areas of the country and in concert with supportive technical factors, natural gas futures were higher Monday morning on a mix of fund short-covering and commercial trader buying. The September contract received the biggest boost, soaring to a new, one-month high of $5.22 just before noon. Afternoon profit-taking trimmed the market’s advance, leaving the prompt month to close at $5.129, up 9.2 cents for the session.

The rally came as little surprise to most market watchers who witnessed the technical turn-around last week. By breaking through and then settling above key psychological resistance at $5.00, the market sent the message the bottom was in and that prices would likely move higher. A strong opening Monday morning did little to dissuade buyers and September futures had no trouble breaking above last week’s $5.14 high.

However, technical patterns were not the only thing on bulls’ side Monday. Also at work were fundamental factors, which turned positive on the latest medium-range weather forecasts this week. According to the latest six- to 10-day forecast released by the National Weather Service, above-normal temperatures are expected for the Aug. 16-20 time frame across roughly two-thirds of the county. The remaining third, clustered in the Southeast and South Central U.S., is expected to see average mercury readings, which in the middle of August translates into hot weather.

This latest weather forecast is also a stark contrast to some incredibly bearish weather experienced by the East since late spring. With temperatures rarely reaching past the 90 degree mark in population centers of Washington, New York and Boston, this summer has shaped up to be one of the coolest in recent memory, allowing the market to catch up on its storage levels. With roughly 900 Bcf left to fill, it now appears that storage will reach the 3,000 Bcf “comfort level” by Nov. 1.

However, a Washington DC-based broker is quick to note that reaching the 3,000 Bcf level is a foregone conclusion and has already been factored into the price level. For him, a more important factor at this stage of the game is the vigor with which industrial users of natural gas were seen buying last week when prices were still below the $5.00 mark. “They weren’t all priced out of the market entirely. It appears that some of them were just on the sidelines.”

And while fundamentals such as weather and industrial buying have set the market in motion, it is usually technical factors that dictate the size of the rally. Accordingly the broker points to congestion in the $5.40 area ahead of more stalwart resistance at the $5.61 high from early June. “We are bullish in the short-run and in the long-run. The [low] is in. The only question now is how high we go.”

And while Craig Coberly of GSC Energy in Atlanta agrees that the longer-term trend is bullish, he does not rule out some selling opportunities on the way up. Specifically, he calls for a rally to the $5.24-30 area to be followed by a correction back toward the $5.00 mark. However, only a break below the July low of $4.58 would invalidate his longer-term bullish outlook.

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