The NYMEX November natural gas futures contract opened higher Tuesday and then lost some ground as traders attempted to gauge the direction of the market after several days of significant price increases.
The November contract settled at $3.237/MMBtu Tuesday, down 3.8 cents day on day. The contract's trading range was $3.209-$3.30/MMBtu.
A week ago, the November contract finished the day at $2.974/MMBtu. In the past week, the front-month contract has pushed 10% higher during what is traditionally considered a "shoulder" month, with moderate temperatures and working gas in storage nearly 6% above the five-year average of 3.475 Tcf.
Energy consultant Kyle Cooper with ION Energy Group said that the current bearish storage situation makes it hard to justify the recent rally.
"The fundamentals just don't support it right now, but I am still bullish for this winter," Cooper said.
The US National Weather Service forecast for the upcoming six to 10 days continued to show slightly above-average temperatures from the Rockies to the East Coast.
However, a few degrees of higher temperatures during mid-October is not likely to translate into significantly higher demand for gas as the market transitions from air-conditioning load to the winter heating season.
On the gas supply front, dry gas supplies for the Lower 48 states on Tuesday are expected to be about 69.4 Bcf. According to Platts Analytics' Bentek Energy, this supply level represents a year-to-date low and is about 4% lower than available supplies last year on this date.
In the tropics, the US National Hurricane Center continued to show Tropical Storm Nicole moving out to sea in the Atlantic Ocean, but Bermuda may have a brush with the system by Thursday.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
