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Traders Mulling Low Heating Requirements, Looming Tropical Storm

November natural gas is expected to open 2 cents lower Friday morning at $2.90 as traders factor in a persistent loss of heating load and the emergence of yet another tropical storm. Overnight oil markets tumbled.

Overnight weather models reiterated the theme of a hefty loss of seasonal heating load. "[Friday's] six- to 10-day forecast is warmer than yesterday's forecast across the eastern two-thirds of the” continental United States. “The West and portions of the north-central U.S. are cooler," said WSI Corp. in its morning report to clients. Population-weighted cooling degree days “are up 3.1 to 13.9.” Gas-weighted heating degree days “are down 7.6 to 20.6, which are 22 below average.”

There are some minor cooler risks across the East early in the period and the West late in the period. The Midcontinent has some warmer potential in advance of a cold front, WSI said.

Otherwise, the big weather news is the shutting in of production and evacuations of platforms and facilities in the eastern Gulf of Mexico early Thursday in preparation for Tropical Storm (TS) Nate, which potentially could make landfall on the Gulf Coast this weekend.

In its 7 a.m. CDT advisory Friday, the National Hurricane Center (NHC) said Nate was 230 miles south southeast of Cozumel, Mexico and was moving toward the north northwest at 14 mph. Maximum sustained winds were 45 mph, with strengthening expected as the center moved over the northwestern Caribbean Friday. NHC said it expected then Hurricane Nate to reach the northern Gulf Coast Saturday evening. Based on NHC projections Nate is expected to follow a sinuous trajectory reaching the lower Mississippi Delta and arcing to the north northeast.

Based on data from offshore operator reports submitted to the Bureau of Safety and Environmental Enforcement (BSEE) as of 11:30 CDT Thursday, about 6.42% of natural gas production, or 206.71 MMcf/d, had been shut-in, while 14.55% of the oil production was shut-in, representing about 254,607 b/d.

Tom Saal, vice president at FCStone Latin America in Miami in his work with Market Profile said he expects the market to test Thursday's value area at $2.964 to $2.934 and "then" test $2.912 to $2.894. "Eventually" he anticipates the market will test $3.023 to $3.007.

In overnight Globex trading November crude oil skidded $1.09 to $49.70/bbl and November RBOB gasoline fell a penny to $1.5996/gal.

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