August natural gas is set to open 5 cents higher Tuesday morning at $2.75 as traders focus on a continuing dynamic of supply contraction and weather forecasts remain supportive. Overnight oil markets bounded higher.

For the moment, traders see the path of least resistance to be higher. “Lack of significant chart support or resistance within the $2.70-2.90 zone is keeping this market highly sensitive to even modest adjustments in the short-term temperature views,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients.

“This was on display [Monday] as the market plunged by some 7% as some of the models indicated less heat than the forecasts issued within the weekend updates. But at the end of the day, most outlooks continue to favor above-normal patterns spread broadly across the U.S. that will likely keep injections downsized appreciably through the rest of this month.

“Our expected 47 Bcf build on Thursday will likely receive a bearish interpretation in potentially keeping nearby futures gravitating toward the $2.70 area depending upon weather updates. Nonetheless, we still see the supply surplus contracting by more than 100 Bcf this month in potentially keeping end-of-season stocks downsized to around 4 Tcf relative to most ideas of a month or two ago that favored supply at around 4.2 Tcf or more. As long as temperatures remain warm enough to maintain the dynamic of surplus contraction amidst a need to sustain some hurricane premium, upside price risk will exceed that to the downside.”

In a Tuesday morning report, said it looks for continued warm temperatures for the next week punctuated by periodic systems expected to graze more northern latitudes. “Hot high pressure continues dominating the central and southern U.S., with widespread 90s to 100s, including all of Texas. A weather system that brought cooling over the Great Lakes, Mid-Atlantic and Northeast this past weekend is exiting with rapid warming expected early this week to again push highs back into the upper 80s to lower 90s, including Chicago, and then major Northeast cities later in the week.

“However, yet another weather system tracking across the north-central U.S. mid-week will provide cooling over these same regions late in the week. Over the West, systems off the Pacific will keep conditions cool over the Northwest and northern Rockies, but still hot across the Southwest. Overall, natgas demand will be moderate to high over the next seven days.”

In overnight Globex trading August crude oil added $1.12 to $45.88/bbl and August RBOB gasoline rose 3 cents to $1.4152/gal.