October natural gas rose Wednesday as traders noted a strong seasonal tendency for natural gas prices to rise in the August-November period and expected the government to release inventory figures Thursday showing increases in inventory about in line with seasonal norms. At the close October had risen 14.5 cents to $4.054 and November had added 14.9 cents to $4.173. October crude oil fell 9 cents to $88.81/bbl.

Fundamentalists seem willing to concede to price seasonality for the moment in spite of government reports suggesting that natural gas production may be as much as 6% higher than a year ago. “I think there is a chance of a rise of 50 cents or so based on seasonality,” said Kyle Cooper, principal at IAF Advisors in Houston. “At that point it would likely be a good selling opportunity. Supply and demand favors low prices and if weather remains moderate, I think we’ll see injections into November, but I don’t think we’ll see the storage levels of last year.”

Storage will come into sharper focus Thursday with the Energy Information Administration’s (EIA) report on natural gas inventories. Last year 52 Bcf was injected and the five-year average stands at 60 Bcf. Analysts at Citi Futures Perspective in New York are looking for a build of 66 Bcf and industry consultant Bentek Energy, utilizing its North American flow model, predicts an increase of 56 Bcf. A survey of 23 industry participants by Reuters revealed an average 61 Bcf with a range of 51 Bcf to 78 Bcf.

Bulls got some welcome news in the form of reports of swift restoration of power to customers hit by Irene over the weekend. The Department of Energy reported Tuesday that utilities from Maine to North Carolina had restored power in less than a week to 57% of 6.69 million homes affected by the storm. Irene made landfall Aug. 27 as a Category One hurricane in North Carolina before striking New York the next day.

The government also said power will be restored by Sept. 2 to the majority of customers in New York and Virginia, the states with the highest number affected by the storm. For others, recovery may take longer as crews struggle to clear trees and debris and restore power lines.

Observers saw Tuesday’s 7.9-cent rise as short-covering, and analyst Peter Beutel, publisher of Daily Oil Hedger, suggests that “end-users and fundamental traders were buying lightly as they saw quotes fall under $3.80 for the first time in a very long time. We have seen buying develop on a scaled-down basis as prices have dropped to progressively lower levels.

“The trade still believes that prices should be bought beneath $4.00, but the realities of this market continue to press prices lower. As a result, we seem to get a bout of short-covering and trade buying every 10 cents lower or on the break to a new 10-cent handle. Prices cannot generate much follow-through buying, but sellers have been having trouble sustaining weakness on new lows at these levels.”

If Beutel’s concept is correct, October futures have a couple of more 10-cent handles to go. A $3.731 double bottom was posted in early March, and October traded $3.50 in October 2010; $3.50 could be key as the next major low was $2.500 in September 2009.

Forecasters see renewed heat but limit it to the West. “A stronger heat ridge into the Pacific Northwest and Western Canada offers to match or exceed the hottest temperatures seen this summer,” said Matt Rogers of Commodity Weather Group in Bethesda, MD. “We also see more offshore flow down the West Coast, suggesting a hotter California in the six- to 10-day [forecast] (especially in the northern half). Seasonal to cool central to eastern U.S. weather is expected for next week into most of the 11-15, but there are signs on especially the European models for some heat to return to Texas and the Midwest.”

In its 5 p.m. EDT report the National Hurricane Center (NHC) said near-Hurricane Katia was churning in the Atlantic 1,285 miles east of the Leeward Islands with winds of 70 mph and heading to the west-northwest at 20 mph. NHC projections show it missing the Gulf of Mexico. A second disturbance in the western Caribbean is given a 30% chance of development into a tropical cyclone in the next 48 hours.

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