Natural gas futures prices were higher for a second day Tuesday, lifted by above-normal temperatures in the Southeast and position adjustments a day before the October contract goes off the board.
The rally follows a four-day decline last week that slashed prices by more than 10 cents amid a seasonal lull between peak summer and winter demand. Prices ended the week at the lowest level since Oct. 27.
Trading interest is expected to be dominated by the expiration Tuesday of October options and repositioning ahead of the Wednesday's expiry of the October futures contract.
Output remains strong and storage levels are ample, preventing prices from mounting a run back toward the $4-per million British thermal units level hit in the first half of September, when storms temporarily halted large volumes of Gulf Coast output.
The National Hurricane Center said the remnants of Tropical Storm Ophelia had an 80% chance of reforming into a hurricane near the Leeward Islands, but there is no indication that the storm, or Tropical Storm Phillipe in the Atlantic off Cape Verde would present a threat to Gulf production.
Natural gas futures for October delivery on the New York Mercantile Exchange were 4.7 cents higher, at $3.829/mmBtu, after moving in a range of $3.782 to $3.853 since Monday's settlement. November gas was 4.6 cents higher, at $3.89/mmBtu.
The National Weather Service near-term forecast shows above-normal temperatures centered around Texas for the next six to 10 days, which could trim the scope of injections into storage in coming weeks.
Tim Evans, analyst at Citi Futures Perspective, said he expects data set for release Thursday by the Energy Information Administration to show gas storage rose by 93 billion cubic feet in the week ended Sept. 23, exceeding both the year ago and the five-year average by about 20 bcf. He trimmed his projections for storage increases over the coming two weeks based on the temperature outlook, but volumes are still expected to be well-above the five-year average increases.
Still, as winter heating demand emerges he sees "nearby futures possibly rebounding into the $4.50-$5.00 range by year end." Prices last hit $4.50 in July.