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Shorts Growing Impatient; September Called 3 Cents Higher

September natural gas is expected to open 3 cents higher Tuesday morning at $3.86 as traders factor in coal-switching and somewhat supportive near-term weather. Overnight oil markets eased lower.

Analysts see a market that for the moment is having to deal with impatient shorts, a weather outlook that is less bearish, and a hint of coal-to-gas switching. "This market was able to piece together a small advance [Monday] with the assistance of short-term temperature updates that appear less bearish than those seen at week's end," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday to clients.

"Although no significant or broad-based hot spell is being seen on the horizon, the shift in weather views appeared sufficient to quell selling interest for now. Short position holders have also become impatient with the market's inability to post significant price change from two weeks ago...We believe that the market is also being forced to price in another downsized storage injection from last Thursday's 88 Bcf build. We will be looking for an increase of 84 Bcf that would compare with the five-year average hike of 49 Bcf.

"Although year-over-year comparisons will become more difficult from here on out, we still see the shortfall against averages peeling off in sizable chunks at least within the next three weekly EIA releases. Nonetheless, it would appear that a $3 price handle is beginning to kick in coal to gas displacement that could keep the trade range bound for at least another week with $4 back on the table."

Power generators across the Midwest can expect weak wind generation for the next tow days, according to forecasts by WSI Corp. It said that throughout MISO (Midwest Independent System Operator), "a cold front and wave of low pressure will slide out of the northern Plains and across the Midwest during the next two to three days with a round of rain and thunderstorm activity. Meanwhile, high pressure will nose southward into parts of the Upper Midwest and Great Lakes. High pressure should become more expansive during Friday into Saturday which will confine the chance of any wet weather into the southern tier. Rainfall amounts may range as high as 1-3 inches."

"Weak wind generation is expected for a good portion of [Tuesday]. The cold front and wave of low pressure will cause generation to improve tonight, Wednesday into early Thursday morning, at which point output may peak 2-3 GW," the company said in its morning forecast.

The National Hurricane Center in its 5 a.m. EDT Tuesday report said Hurricane Bertha had weakened to a tropical storm and was located 475 miles west of Bermuda. It was moving to the north-northeast at 22 mph, and winds were down to 65 mph.

In overnight Globex trading September crude oil fell 8 cents to $98.21/bbl and September RBOB gasoline shed a half cent to $2.7203/gal.

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