November natural gas is set to open unchanged Monday morning at $3.86 as traders can find no significant change in moderate near-term weather outlooks. Overnight oil markets plummeted once again.
Overnight weather forecasts turned cooler, although any significant impact on demand seems unlikely. WSI Corp. in its morning six- to 10-day outlook said the "forecast has trended colder across the eastern two-thirds, as well as CAISO, but has trended warmer over the interior West and northern Plains. Confidence in the forecast is considered near to slightly above average standards, thanks to good large-scale agreement through the period."
Risks to the forecast include cooler temperatures being "favored over the Northeast as models now depict a cut-off upper-level trough to lift northward early, phase with the mid-latitudes, and advect another cool air mass across the region."
The six- to 10-day period may be a little cooler, but immediate effects on heating and cooling requirements are expected to be far below normal. The National Weather Service (NWS) in its forecast for the week ended Oct. 18 predicted combined heating and cooling requirements would be well below seasonal norms in major energy markets. NWS expects combined heating and cooling degree days in New England to be 50, a stout 54 degree days (DD) below normal, and the Mid-Atlantic is seen enjoying just 34 DD, or 56 fewer than its mid-October normal. The greater Midwest from Ohio to Wisconsin is anticipated to endure 47 DD, or 48 fewer than its norm.
The Atlantic Basin has heated up tropical weather-wise, although no impact is seen on natural gas infrastructure. In its 5 a.m. EDT report Monday the National Hurricane Center (NHC) said Tropical Storm Fay was sporting 65 mph winds but was headed east from Bermuda. Tropical Storm Gonzalo at 8 a.m. EDT was 20 miles east of Antigua and was holding 60 mph winds. NHC projected its path to be northward and then northeast towards Bermuda.
Mike DeVooght of DEVO Capital, a Colorado-based trading and risk management firm, said funds and managed accounts will be reluctant to pressure the short side of the market going forward. He advised end-users and speculative accounts to purchase January $4.20 call options and sell January $3.90 puts. For producers and those with downside market exposure, he is looking for the market to reach $4.50 to $5.00 before placing hedges.
In overnight Globex trading November crude oil fell $1.25 to $84.57/bbl and November RBOB gasoline dropped 3 cents to $2.2241/gal.