October natural gas is set to open 4 cents higher Tuesday morning at $3.89 as traders continue to see a bearish trading environment, but there’s a hint that surprises could come to the upside. Overnight oil markets rose.

Mike DeVooght, president of DEVO Capital Management, a Colorado-based trading and risk management firm, is counseling both trading accounts and end-users to stand aside the market. Physical market longs and those with exposure to lower prices should hold on to the tail end of a short summer strip initially entered at $4.20 to $4.30, but also a second summer strip sold at $4.50. According to DEVO figures, the summer strip settled at $3.821 on Friday.

“As we wrap up the summer, there is a very good chance that the gas market will continue to probe the year’s lows. If we fail to hold the $3.75-3.80 level, technical selling could push the gas market into the mid-$3 level. A cool summer, high production and mediocre demand continue to keep the gas market on the defensive. To have a substantial bull market, we feel we need to see an uptick in demand to offset the steady production increase we are experiencing in the U.S. We could see short-term weather-related spikes, but we still feel selling rallies above $4.50 for producers is an attractive forward selling level.”

Others also think standing aside the market is a good idea inasmuch as the risk-to-reward environment doesn’t look attractive. “Although this market managed to finish the day in firm fashion, today’s drop to below last week’s lows has further shifted pricing momentum back to the down side,” said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday to clients. “Weekend temperature updates looked bearish from our perspective, with mild trends beginning to stretch out through the first week of October. It would appear that some additional large storage injections now lie ahead out through the EIA [Energy Information Administration] release of Oct. 9th as a minimum.

“So while this week’s EIA report will show reduction in deficit contraction from the prior week, we still see the dynamic of a narrowing deficit very much intact and on target to meet our 3.6 Tcf supply peak by mid-November. However, we do feel that speculative selling interest is beginning to wane and a bullish surprise in Thursday’s EIA release could pack more pricing punch than an equivalent sized bearish surprise. But between now and Thursday, the market could easily achieve our downside target to the $3.75 level despite speculative short-covering out of the October contract that goes off the board at week’s end,” Ritterbusch said.

“All in all, we are maintaining a bearish approach for now but would advise against fresh shorts at current levels given what we view as unfavorable risk-reward ratios.”

In overnight Globex trading November crude oil rose 69 cents to $91.56 and November RBOB gasoline added 2 cents to $2.5089/gal.