The August natural gas contract put in another uninspired performance Tuesday as weather reports citing continued hot weather seem to be losing their market-moving punch. August fell 1.6 cents to $4.370 and September eased 2.4 cents to $4.331. September crude oil rose 39 cents to $99.59/bbl.

Analysts saw the day’s weak performance as being “in part due to the simple disappointment that Monday’s early attempt at moving back to the upside failed to take hold,” said Tim Evans, analyst with Citi Futures Perspective in New York. “The weather forecasts are perhaps more supportive than a day ago, with the more confident first 10 days of the outlook a little warmer, and the more speculative 11-15 day prospects slightly cooler than Monday’s afternoon runs. There is also a tropical wave (90L) that has some prospects for possible development as it heads toward northern Mexico or the Texas coast over the next five days, but it currently looks as though this may be more of a welcoming rain event than the big storm that would threaten offshore oil and gas production or put refineries at risk.”

At 2 p.m. EDT the National Hurricane Center reported that showers and thunderstorms associated with the wave “have become a little better organized…the system does not have a closed circulation at this time…This system has a medium chance, 30%, of becoming a tropical cyclone during the next 48 hours.”

The government sees plump ending inventories at the end of the injection season, but private analysts see a lower figure. At the halfway point through the injection season, working natural gas inventories for the Lower 48 states as of July 15 were about 7.4% below the level for the same period last year due to more nuclear outages and increased air conditioning use resulting from warmer-than-normal weather, the Energy Information Administration (EIA) said (see related story).

The EIA estimates that 2.6 Tcf has been injected so far during the injection season, which began on April 1 and will run through Oct. 31, compared to 2.9 Tcf for the same period in 2010 and the five-year average of about 2.7 Tcf.

Despite the shortfall, the EIA projects that end-of-season gas inventories will be 3,819 Bcf, or just 28 Bcf less than last year’s all-time record. “Based on inventory levels as of July 15, this projected end-of-season level implies a net average injection of 74.5 Bcf per week, or 10.6 Bcf/d for the remainder of the year,” the agency said.

Others aren’t so sure of such a large season-ending inventory. Kyle Cooper of IAF Advisors in Houston is looking for “between 3.63 Tcf and 3.65 Tcf because it has been so hot. That’s right at the five-year average. Throw out the last two years and that’s actually very, very high.”

Near-term weather forecasts call for no letup in the oven-like temperatures searing the mid-section of the country. MDA EarthSat in its six- to 10-day outlook shows above- to much-above-normal temperatures from Maine to Southern California and southern Georgia to South Dakota. “The forecast has shifted in the hotter direction across Texas, where several days of much-aboves were added. The expected pattern should easily keep the 100-plus streak alive in Dallas as highs consistently top out close to 105 degrees.

“Some of these much aboves should stretch toward the Midwest as well early on, though extreme heat is less likely farther north. While much-aboves are not currently expected, the Northeast will remain plenty hot as well.”

Analysts don’t see the warm weather as sufficient to keep prices steady. “Although above-normal temps are widely expected across most of the nation during the next couple of weeks, deviations from normal are looking much smaller than was the case last week,” said Jim Ritterbusch of Ritterbusch and Associates. “As a result, some temperature premium is currently being extracted from the market. This process has pushed prices back down to low enough levels to entice the funds back into the short side. But while the larger institutions may currently have both technical and fundamental factors on their side, we still have much difficulty constructing a price scenario capable of carrying September futures to below the $4.20 level.”

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