September natural gas futures rose Tuesday on a combination of technical buying and weather forecasts calling for greater heat at Midwest points. At the close September had risen 10.4 cents to $3.993 and October had gained 9.9 cents to $3.968. October crude oil gained $1.02 to $85.44/bbl.

Short-term traders attributed the day’s gain mainly to technical buying. “They’ve upgraded a couple of storms, but we bounced off the numbers we were supposed to,” said John Woods of J.J. Woods and Associates in New York. He said the next stop was $4, but “it still has some room to move. There is no reason it can’t get up to the mid $4.05 level, and then I think you will see some people come in and lean on it a little bit.

“You’ve got to remember that the [storage injection] number is coming out Thursday, and some traders will lighten up before that and go into it pretty cautiously. Last week’s number was 50 Bcf, and no one was calling that one. [Tuesday] was more of a technical move than anything else; $3.85 was a pretty good [support] number and it held, and we moved higher from there.”

MDA EarthSat in its six- to 10-day forecast sees heat returning to Midwest locations. “The themes of the forecast are mostly consistent with [Monday], though some detail tweaks were made including a slightly cooler Northeast, warmer Midwest late and a hotter South. The heat across Texas could push to record levels during the front half of the period, when both Dallas and Houston should top 105 degrees Fahrenheit,” the forecaster said in its morning report. “The Midwest and East should see some cool variability mix in early on in the wake of Irene. A warm-up will develop over the central U.S. late, which should provide plenty of aboves [normal temperatures] to close out the period. Confidence [in the forecast] remains the same as [Monday] at just slightly above moderate.”

Market technicians note that prices remain wired into a two-year triangular congestion pattern with a succession of lower high prices and higher lows. “The lower bounds of the two-year-old triangular congestion pattern continues to provide support, the intraday RSI [Relative Strength Indicator] continues to produce bullish divergence and seasonality has shifted to favor the bulls,” said Brian LaRose, analyst with United-ICAP. “[These are] three very good reasons to take a defensive stance. [We] see a decisive break below $3.693-3.591 as the only way to signal a drop to $3.200-3.196.”

Top analysts see fundamental factors keeping prices constrained at least until Thursday’s storage report inserts its normal dose of volatility. “Although Hurricane Irene is developing into a powerful storm system, the projected path of the hurricane is expected up along the East Coast of the U.S. and far away from the [Gulf of Mexico] drilling platforms. As a result, the storm has required little injection of premium and has kept nearby futures from sustaining price advances much above the $3.90 level,” said Jim Ritterbusch of Ritterbusch and Associates.

He added that along with more supportive near-term weather forecasts, “pushing nearby futures to below last week’s lows at the $3.84 area will be difficult until Thursday’s storage data possibly prompts more aggressive selling. We are maintaining a bearish view over the very near-term period in quest of a further price decline toward the $3.75-3.80 zone per September futures. But we would add that such a downside move will need to be seen this week if it is to transpire. Meanwhile, we will be viewing this week’s lows as an easy downside target for October futures upon attaining spot status next week.”

At 5 p.m. EDT the National Hurricane Center (NHC) reported that Hurricane Irene was 50 miles south-southeast of Grand Turk Island and was packing winds of 90 mph. It was moving to the west-northwest at 9 mph and a turn to the northwest was expected Wednesday. NHC projections have it off the North Carolina coast Saturday.

NHC said it was also following a low-pressure system 925 miles west-northwest of the Cape Verde Islands with a 10% chance of development into a tropical cyclone in the following 48 hours. It also reported a large low-pressure area 200 miles southeast of the Cape Verde Islands and this was given a 20% chance of development.

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