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Gains Expected to Be Short-Lived, Yet September Called 3 Cents Higher

September natural gas is set to open 3 cents higher Tuesday morning at $2.71 as weather forecasts again turned warmer and the tropical Atlantic added another storm. Overnight oil markets fell.

In a Tuesday morning report WSI Corp. said, "[Tuesday's] six-10 day period forecast is slightly warmer over the East and South when compared to yesterday's forecast. CONUS PWCDDs are up +1.7 to 55.7 for the period. Forecast confidence is considered slightly above average standards due to reasonably good agreement between the models. Uncertainty is elevated over the Southeast and is dependent on the track/intensity of invest 99L [east southeast of the Lesser Antilles].

"Slight cooler risks are placed across the coastal Southeast late in the period if invest 99L ends up tracking across the region."

Traders see a tough market to gauge and suggest sitting on the sidelines. "[S]hort-term temperature views that are beginning to stretch through the first week of September took a bullish turn with above-normal temps anticipated later this week and next across about the eastern one-third of the nation," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday.

"Additionally, [Monday's] sharp rebound appeared to reflect some injection of storm premium as a couple of tropical systems besides Fiona are developing within the central Atlantic. While we will reiterate that a 400 Bcf storage surplus and reduced importance of GOM output will limit further expansion of storm premium, the first major event into the GOM usually prompts an exaggerated price impact. And regarding the temperature factor, the market will soon be forced to focus on the low demand 'shoulder period' with the rollover to the October contract as prompt month a week from [Tuesday]. This remains a market difficult to trade for much more than a quick two- to three-day turn. With values currently at about the middle of our expected range, a position type recommendation remains difficult to construct from either side of the market."

At 5 a.m. EDT the National Hurricane Center (NHC) reported that Tropical Depression Fiona was barely holding on and continued on its trajectory toward North Carolina and was 455 miles south of Bermuda. It was traveling west-northwest at 13 mph, and maximum sustained winds were 35 mph.

NHC also identified a tropical wave, Invest 99L, a few hundred miles east of the Lesser Antilles moving to the west-northwest at 15 to 20 mph. It was given a 50% chance of tropical storm development in the succeeding 48 hours.

Tropical Storm Gaston had strengthened to 50 mph and was 545 miles west of the Cabo Verde Islands. It was headed west-northwest at 20 mph. NHC projected its course to be east of Bermuda.

In overnight Globex trading October crude oil fell 40 cents to $47.01/bbl and October RBOB gasoline shed a penny and a half to $1.3889/gal.

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