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NatGas Cash Eases, But Market Technicians Look For Futures Above $3

Physical natural gas for Wednesday moved little in trading Tuesday, with some producing basins reporting no movement at all and most points moving within a few pennies of unchanged.

California locations showed the greatest fluctuation with pipeline maintenance completed, and the NGI National Spot Gas Average eased a penny to $2.47. Futures prices continued to romp higher with September adding 8.2 cents to $2.761 and October gaining 9.3 cents to $2.794. October crude oil added 69 cents to $48.10/bbl.

Futures traders acknowledged the impact of recent weather forecasts, but added they thought traders were getting a jump on Thursday's inventory report. "Some hot weather came last week, but it has cooled down a little bit," said a New York floor trader. "I think traders are showing a little more of a play for the [storage] number this week. This week's number is going to show last week's stuff, and I think it's going to be a little bullish, so they are taking the bull by the horns a little early.

"I think traders want to get it past $2.85 to $2.86, and they are starting early."

In an early survey, The Desk's Early View Gas Storage Estimates pegged the number Thursday at an average 20 Bcf, well below last year's 69 Bcf and a 61 Bcf five-year average.

Others echo the importance of the low $2.80s. "$2.70 was important. You wouldn't want the market to get above that for a continuing five-wave move down from the $2.91 high [July 29]," said Walter Zimmermann, vice president at United ICAP.

"We have at least de-railed that bearish case, but to finish the last hope for the bears, you need to get above $2.83. That's the final straw. There is no fall back.

"My bullish case is that we are in a five-wave advance from the March low [$1.611], but the target is only $3.11. That's only a few pennies above the recent high of $2.998. If we are lucky enough to get over $3, I would hope that instead of getting bullish, producers would hedge. I don't see it getting much above the $3.10 to $3.12 area because then there is a seasonal downside risk."

In a Tuesday morning report, WSI Corp. said, "[Tuesday's] six-10 day period forecast is slightly warmer over the East and South when compared to yesterday's forecast. CONUS PWCDDs are up +1.7 to 55.7 for the period. Forecast confidence is considered slightly above average standards due to reasonably good agreement between the models. Uncertainty is elevated over the Southeast and is dependent on the track/intensity of invest 99L [east southeast of the Lesser Antilles].

"Slight cooler risks are placed across the coastal Southeast late in the period if invest 99L ends up tracking across the region."

Other traders don't see an advance in the cards and expect a tough market to gauge and suggest sitting on the sidelines. "[S]hort-term temperature views that are beginning to stretch through the first week of September took a bullish turn with above-normal temps anticipated later this week and next across about the eastern one-third of the nation," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday.

"Additionally, [Monday's] sharp rebound appeared to reflect some injection of storm premium as a couple of tropical systems besides Fiona are developing within the central Atlantic. While we will reiterate that a 400 Bcf storage surplus and reduced importance of GOM output will limit further expansion of storm premium, the first major event into the GOM usually prompts an exaggerated price impact. And regarding the temperature factor, the market will soon be forced to focus on the low demand 'shoulder period' with the rollover to the October contract as prompt month a week from [Tuesday]. This remains a market difficult to trade for much more than a quick two- to three-day turn. With values currently at about the middle of our expected range, a position type recommendation remains difficult to construct from either side of the market."

In cash market trading, prices in California fell although power loads were forecast nominally higher, and next-day power prices eased. CAISO reported that peak power demand Tuesday of 37,433 MW was expected to reach 38,868 MW Wednesday. Intercontinental Exchange reported that on-peak power Wednesday at SP-15 fell 89 cents to $35.25/MWh.

Gas at Malin shed 32 cents to $2.57 and deliveries to the SoCal Citygate shed 16 cents to $2.77. Gas priced at the SoCal Border Avg. Average dropped 11 cents to $2.74.

Parcels on El Paso S. Mainline/N. Baja were quoted 8 cents lower at $2.82, and gas on Kern Delivery changed hands at $2.80, down 12 cents.

Major hubs showed little change. Gas on Dominion South added 2 cents to $1.31, and deliveries to the Chicago Citygate added 2 cents to $2.66. Henry Hub gas fell 3 cents to $2.71 and gas at the PG&E Citygate added 3 cents to $3.20.

In its early Tuesday morning report, the National Hurricane Center (NHC) reported that Tropical Depression Fiona was 455 miles south of Bermuda and continuing on its trajectory toward North Carolina. Fioina was traveling west-northwest at 13 mph with maximum sustained winds of 35 mph.

NHC also identified a tropical wave, Invest 99L, a few hundred miles east of the Lesser Antilles, moving to the west-northwest at 15 to 20 mph. It was given a 50% chance of tropical storm development in the succeeding 48 hours.

Tropical Storm Gaston had strengthened to 50 mph and was 545 miles west of the Cabo Verde Islands. It was headed west-northwest at 20 mph. NHC projected its course to be east of Bermuda.

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