Natural gas has shown a road to recovery from second week onwards with gains backed mostly by concerns, a tropical depression could strengthen into a storm and disrupt Gulf of Mexico gas production. U.S. National Hurricane Center said that Tropical Depression 3 formed near the Bahamas and could build up into Tropical Storm Bonnie.

While NHC does not expect the storm to reach hurricane strength before making landfall near Louisiana, computer models show the system skirting South Florida on its way to the central Gulf of Mexico, which could mean some disruption to Gulf Coast gas supplies.

The new system served as a reminder to traders that the hurricane season this year, which runs from June through November and doesn't peak until August and September, was expected to be an active one.

While near record heat has helped slow storage builds and underpin cash prices, traders said milder forecasts for next week and still high inventories and production were likely to make it difficult for prices to move much higher in near term.

accuweather.com expects temperatures in the Northeast and Midwest, key gas consuming regions, to remain above normal in upcoming week, with highs, particularly in New York, mostly topping 90 Fahrenheit (32 Celsius).

Elsewhere, gas drilling rig count jumped 15, to a 17 month high of 979, according to Baker Hughes, well above the 850 level. But horizontal rigs, most often used to extract gas from shale dropped for the first time in 10 weeks and could be an early sign shale output will eventually slow.

Natural Gas traded in wide band during July. After a weak start to the month that saw the gas prices dipping towards Rs.201/mmbtu levels, there was a strong recovery seen mid month towards 220 mark. At the present juncture, market still seems to be confused and only a strong surge past 242 mark would confirm a persistent bullish trend for the next few months.

Otherwise the fortnightly bouts between bulls & bears that are won on alternate basis by each should persist for somewhat longer.

Courtesy: Religare Commodities

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