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Traders Mull Near-Term Cooling, Loss of Demand; June Seen A Nickel Lower

June natural gas is set to open 5 cents lower Tuesday morning at $3.28 as traders factor in moderating temperatures and a short-term loss of demand. Overnight oil markets retreated.

Overnight weather models showed less near-term cooling load. "[Tuesday's] six-10 day period forecast is cooler in the East, especially Northeast, whereas slightly warmer Northwest and Southern Plains," said WSI Corp. in its morning six-to 10-day outlook. CONUS PWCDDs are down -3.6 to 27.1 for the period.

Cooler risks continue to be placed over the East if models trend even stronger and farther southward, displaced with an upper-level trough forecast to push across the Great Lakes and Northeast during the latter half of the period.

Near term, the National Weather Service (NWS) forecasts a lessening of both heating and cooling load for major East and Midwest energy markets. For the week ending May 27 New England is expected to see a combined 41 degree days (DD) or seven fewer than normal. New York, New Jersey and Pennsylvania are expected to deal with all of 22 DDs, or 21 fewer than normal, and the greater Midwest from Ohio to Wisconsin is predicted to experience 35 DDs, or 20 fewer than its normal seasonal tally.

Physical traders Tuesday may be able to anticipate lower quotes as figures show a greater decrease in demand than a loss of production. "Production is down about 0.28 Bcf/d DOD (though with maintenance season still very much in effect revisions are still frequent)," said industry consultant Genscape in a morning report to clients. "The bulk of today's drop comes out of the Permian where Transwestern receipts from Enterprise's South Eddy plant dropped to zero. Imports from Canada are holding steady around 5.4 Bcf/d as flows on Vector inch back up toward pre-maintenance levels. Prior to the outage it was exporting about 1.15 Bcf/d to Dawn. Current volumes are up to around 0.85 Bcf/d.)

"Total demand is down about 0.5 Bcf/d DOD. Exports to Mexico have been slowly inching up with hot temperatures in northern Mexican states, and LNG exports are holding steady around 2.2 Bcf/d. But domestic demand is down. Even though some areas of the country are still registering heating loads, those numbers are outweighed by lower power burns. Genscape's proprietary power estimate for today is at 24.2 Bcf/d, a 0.9 Bcf/d drop from Monday."

In overnight Globex trading July crude oil fell 3 cents to $51.10/bbl and July RBOB gasoline fell fractionally to $1.6540/gal.

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