September natural gas is expected to open 3 cents higher Tuesday morning at $4.00 as traders focus on a gradual lessening of the aggressive storage builds of the last several weeks. Overnight oil markets retreated.
Top traders see weather patterns trending to less-elevated injection patterns by next week. "Expectations across next week are generally favoring above-normal trends that will be covering virtually the entire eastern half of the U.S. These warmer temps could bring a near halt to the dramatic contraction in the supply deficit that has been evolving across this summer," said Jim Ritterbusch in closing comments Monday to clients.
"While we look for Thursday to indicate another strong build of 76 Bcf that would compare with a five-year average hike of 45 Bcf, it would appear that the last EIA [Energy Information Administration] release of this month could be appreciably downsized toward more normal injections. Nonetheless, this market is showing signs of waffling just below the $4 mark as large institutional accounts appear selective in exiting short positions acquired during the past several weeks. But should warmer temperature forecasts begin to stretch into next month, we see further upside to about the $4.08 level. Despite today's inability to follow through to the upside, the chart improvement established via [Monday's] highest levels in almost three weeks will likely be keeping speculative shorts in a defensive posture with a strong run up likely on any bullish miss within Thursday's EIA data."
Power generators across the PJM region can expect mild conditions and increased wind output. WSI Corp. in its Tuesday morning forecast said, "A complex frontal system will traverse the power pool [Tuesday] and tonight with rounds of heavy rain and thunderstorms, which may be locally strong. Rainfall amounts may range one to two inches-plus. High pressure is expected to slide into the region in wake of the aforementioned system during the middle to end of the week. This will lead to generally fair and comfortable conditions, though a few pop-up showers cannot be ruled out. Fair and warmer conditions are possible across much of the power pool by the start of the weekend, though there is a chance of showers/storms across ComEd and far northwest areas.
"The frontal system will support a period of elevated wind generation during the next couple of days. Total output may top out over 2 GW at times. Wind generation is expected to decrease and become light during the end of the week. The recent and expected wet weather will likely provide a boost to stream flow and hydro prospects this week."
In overnight Globex trading September crude oil fell 85 cents to $97.23/bbl and September RBOB gasoline lost a cent to $2.7446/gal.