Buoyed by concerns over two possible disturbances in the Caribbean Sea and supported by continued technical bullishness, natural gas futures chopped higher Monday as scale-up commercial selling was supported by moderate fund buying. At $3.507, the October contract was up 4 cents for the session and within striking distance of its four-month high at $3.685. With some local traders out in observance of Yom Kippur, volume was weak in the pit, with estimated volume only registering just 66,195 contracts.

With remnants of Tropical Storm Hannah spread across the Carolinas and far away from the Gulf of Mexico, traders turned their attention back to the Caribbean. Late yesterday the National Hurricane Center was tracking the development of a tropical wave located East-Southeast of Jamaica in the Caribbean Sea. Although it did not have the closed low-level circulation, the wave was sporting near tropical storm force winds, and strengthening to either a tropical depression or storm was possible at any time, the NHC said.

However, the market may not need another tropical storm or hurricane to goose prices higher. By notching a $3.53 high yesterday, the October contract filled in a key upside objective at the $3.46-52 chart gap left on the daily chart dating back to Aug. 28. “The overall tone of this market is positive,” wrote technical analyst Cynthia Kase of New Mexico-based Kase and Co. in a note to customers over the weekend. Although admitting that the wide differential between October and December contracts is a cause for concern, Kase sees the market moving up in the near-term, with a break of the $3.62-68 level leading to an attempt at $3.82. On the downside, support at $3.33 is critical, she reasoned.

Tom Saal of Pioneer Futures in Miami agrees and points to the latest Commitments of Traders data to back his opinion. According to the Commodity Futures Trading Commission, non-commercial “fund” traders flipped from a net-short position of 2,824 contracts to a net-long position of 2,962 contracts during the week ending Sept. 10. “Funds could easily buy another 20,000 contracts [of net length],” he wrote in a note to customers Monday. “That’s bullish.”

In an early prediction for this week’s EIA storage data, Kyle Cooper of New York’s Salomon Smith Barney looks for a build last week in the mid to upper 60 Bcf range to fall short of last year’s 92 Bcf injection and a three-year average refill of 79 Bcf.

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