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Moderating Weather Forecasts Discounted; April Seen 4 Cents Higher

April natural gas is expected to open 4 cents higher Tuesday morning at $3.08 as traders are expected to focus less on near-term weather and more on broader market issues. Overnight oil markets rose.

Overnight weather models came in on a moderate note, with heating load still expected to be below normal. "[Tuesday's] 11-15 day period forecast is warmer than yesterday's over the Northeast and West but cooler over the Midcontinent," said forecaster WSI Corp. in a Tuesday morning report to clients. "CONUS GWHDDs are down 1.3 for days 11-14 and are now 58.6 for the whole period. These are 20.1 below average.

"The timing and details of potential storm systems are key, which is related to the amplitude of the pattern. The southern and eastern U.S., as well as California have some warmer potential. The Rockies, Front Range and north-central states have some colder risks."

According to government figures, heating requirements for the week ending March 25 across major population centers are expected to be mixed. National Weather Service (NWS) forecast that New England would see 203 heating degree days (HDD) or 16 more than normal, and the Mid-Atlantic would experience 189 HDDs, or 17 more than its norm. The greater Midwest from Ohio to Wisconsin was anticipated to have 159 HDDs, or 21 fewer than normal.

Analysts see the focus on storage balances beginning to wane as expectations surface of a more balanced storage dynamic. "Winter-like weather conditions finally returned -- catching many off guard -- with some parts of the U.S., primarily in the Northeast and Midwest, facing the coldest temperatures of the year," said PIRA Energy in a Tuesday morning note to clients.

"The belated return of cold air from the Arctic put an end to worries that U.S. storage levels would swell to 2.2+ Tcf, which was weighing heavily on price expectations throughout February. The end of such concerns is allowing attention to shift back onto the other issues at work that have tightened weather-adjusted balances and kept gas prices at about $3/MMBtu throughout much of the heating season."

In overnight Globex trading the expiring April crude oil rose 11 cents to $48.33/bbl and April RBOB added a penny to $1.6186/gal.

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