October natural gas opened a penny higher Tuesday morning at $3.01 as traders note a continuing reduction in the storage surplus. Overnight oil markets plunged.

“This market appears to have found its comfort level at around the $3 level per October futures ahead of tomorrow’s expiration,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients. “We will continue to highlight some stout time spreads that have recently seen the October-November contango narrow from around 18 cents about six weeks ago to roughly 6 cents. This contraction in the carrying charges has corresponded with a reduction in the supply surplus that is being cut in large chunks of around 30 Bcf per week rather than small 10-15 Bcf pieces that had been widely anticipated a month or so ago.

“We see a further sharp reduction of around 30 Bcf in Thursday’s data that will perpetuate this trend in erasing the long-held surplus against last year’s levels next month. While the bears will continue to cite relatively large supply surplus against average levels at an early stage of the low demand shoulder period, bullish-inclined traders appear to have dynamics on their side as this year’s huge surplus continues to melt in response to an unusually warm late summer/early fall period.”

Forecasters are not calling for much in the way of heating or cooling load. WSI Corp. in its Tuesday morning report said, “[Tuesday’s] 11-15 day period forecast is cooler than yesterday’s forecast across the Midcontinent for days 11-14. The West and parts of the Northeast are a little warmer. PWCDDs are down 0.9 for those days to 15.8 for the period. GWHDDs are up 0.8 to 17.7, which is nearly 20 lower than average.

“Forecast confidence remains on the low end of the scale due to uncertainty and model spread, with the long-range track and influence of 97L, as well as fluctuations with the upstream Pacific flow.”

In overnight Globex trading November crude oil fell $1.30 to $44.63/bbl and November RBOB gasoline dropped 3 cents to $1.3510/gal.