August natural gas is expected to open 13 cents lower Tuesday morning at $2.86 as traders point to a recovery in production from earlier interrupted levels. Overnight oil markets fell hard.

Weather forecasts moderated somewhat over the long weekend, though the basic outlook is intact.

“Above-average period anomalies are expected across the eastern two-thirds of the nation during the six-10 day period, focused over the central U.S.,” said WSI Corp. in its Tuesday morning report. “Period anomalies will range below average over the West. [Tuesday’s] forecast is a little cooler over the West and South but a bit warmer over the Plains, Midwest and Northeast. As a result, CONUS PWCDDs are down 0.8 to 64.5 for the period.

“A -PNA [Pacific North American] pattern offers a general downside risk to the CONUS, with the greatest risk being in the north-central U.S. and parts of the Southeast. The Southwest and Northeast have upside risk, based in part by the GFS.”

Production is recovering. “Lower 48 dry gas production is rebounding from the 168-day low it hit last week, though some regional volumes still remain affected,” said industry consultant Genscape in a Tuesday morning report. “Spring Rock’s Daily Pipe Flow estimate has Lower 48 production at 72.03 Bcf/d, nearly 0.6 Bcf/d above June 28 when daily volumes sank to their lowest point since early January. However, today’s volumes are still 0.42 Bcf/d off the last 30-day average as some regional issues are being resolved while others remain.”

Risk managers see limited hedging opportunities. “Natural gas continues to move higher on warmer than normal temperatures and short-covering,” said Mike DeVooght, president of DEVO Capital Management. “Also giving the market a boost is end-user buying, locking in the forward strip.

“Now that we have seen the short-covering rally we thought was possible, we feel current levels represent attractive levels for producers to start to establish forward sales. But since we are not that bearish, we would establish hedges with either floors or collars.”

In overnight Globex trading August crude oil fell $1.50 to $47.49/bbl and August RBOB gasoline gave up 5 cents to $1.4631/gal.