October futures eased Monday as traders see largely weather-driven weakness in the near term but suggest stronger prices once the heating season kicks in. At the close October had fallen 3.0 cents to $3.885 and November had given up 3.2 cents to $3.966. October crude oil rose 95 cents to $88.19/bbl.

“We continue to see fundamental weakness in the near term as Tropical Storm Nate missed the U.S. Gulf of Mexico and the summer cooling season is winding down, but [there is] potential for a rally back up to $4.50 or more in the months ahead as the upcoming heating season becomes the focus,” said Tim Evans of Citi Futures Perspective in New York. “We don’t foresee natural gas staying at (or below) $4.50 when seasonal demand is going to jump from 53-55 Bcf/d in October to 85-90 Bcf/d in December-January.”

For the moment, directional traders aren’t buying the idea of a rally as traders piled on the short side of the market and exited longs, according to the most recent government report. For the five trading days ended Sept. 6, the Commodity Futures Trading Commission in its Commitments of Traders Report showed managed money reducing long futures and options and adding to short holdings.

At IntercontinentalExchange, long futures and options (2,500 MMBtu/contract) fell 52,486 to 310,024 and short contracts rose by 11,021 to 192,842. At the New York Mercantile Exchange long futures and options (10,000 MMBtu/contract) rose by 2,144 to 137,814, but short futures and options rose by 6,927 to 252,161. When adjusted for contract, size long futures and options at both exchanges fell by 10,977 and short holdings grew by 9,082. For the four trading days ended Sept. 6 September futures rose by 2.9 cents to $3.938.

Top analysts are looking for a little more volatility in the weeks ahead. “As we approach the end of the cooling season, we should start to see a little more volatility as we enter the heating season,” said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. “The market is due for some type of short-covering rally. But there is a good chance that we will not see a significant rally until we wrap up the summer strip. On a trading basis, we will hold current positions.”

For the natural gas market, that means capturing option premiums as the market continues to waffle sideways. “On a trade basis, we continue to use rallies into the mid to high $4 level as a selling opportunity, primarily utilizing collars and selling call premium. If we break lower, we will book profits on the short calls and sell put premium…We will continue to hold our current collars and will look to sell calls and cover our short puts if we trade back above $4.60-4.70. If we break below $3.85, we will roll our short $4.00 puts to $3.85.”

John Sodergreen reports in the Energy Metro Desk Express an early read on this week’s storage report of a build of 85 Bcf from a sample of 17 industry players. The range was from 76 Bcf to 95 Bcf, and last year 96 Bcf was injected; the five-year average stands at 79 Bcf.

Weather forecasters are calling for heat in Texas but also some early season cooler temperatures in the Northeast. “The biggest temperature anomalies over the next two weeks appear to be in the immediate short-term window with heat in Texas this week (low 100s again) and robust early season cooling for the Midwest and East mid-to-late week (lows in the 30s-40s),” said Matt Rogers, president of Commodity Weather Group in Bethesda, MD. “Given the time of year, we may not see the typical demand response, but they should also be brief and mostly on the weekend for the East Coast cities. Otherwise, the six-15 day [forecast] is favoring a widespread seasonal to above-normal temperature pattern. California trended warmer/hotter, while the Pacific Northwest cooler.”

The National Hurricane Center (NHC) continues to track a disorganized Tropical Storm Maria. At 11 a.m. EDT Monday Maria was 175 miles north-northwest of San Juan, Puerto Rico. It was traveling to the west at 2 mph and was holding winds of 50 mph. NHC doesn’t see Maria as a threat to the U.S. mainland and projects a turn to the northeast. Commodity Weather Group sees the next storm occurring “next week in the western Caribbean with the tracking thinking toward Florida (very early yet with low confidence),” said Rogers.

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