March natural gas is set to open 5 cents higher Monday morning at $2.63 as traders factor in expected cooler near-term temperature patterns. Overnight oil markets rose.
In its Monday morning six- to 10-day outlook, Commodity Weather Group sees an expanded area of below and much below normal temperatures encompassing the eastern half of the country.
"The incoming colder pattern rebound maintained its trajectory over the weekend but strengthened as it moved closer in time on all dynamic model guidance," the forecaster said. "While last weekend came in warmer than expected in some spots and the West is seeing general warmer changes in especially the 1-10 day range (80s in Burbank this week), the colder changes for the Midwest, South and East are the prime contributors to today's bigger demand gain compared to last Friday's forecast.
"Expansion into the Midwest and South at times were the biggest additive components, especially in the six-15 day range. The big picture continues to hold Alaska ridging in place with the European and Canadian ensembles especially solid on the view. The American guidance is starting to get more variable at the end of the 11-15 day, which allows for some moderation, especially in the South, but the latest CFS guidance keeps the cold holding into March too," the company said.
In a report, industry consultant Genscape noted a hefty increase in production in just the past 30 days. "Lower 48 dry gas production in the past 30-days and winter-to-date is running more than 5 Bcf/d greater than last year's same time periods. Spring Rock's estimate for Lower 48 dry gas production is at 72.05 Bcf/d for [Monday]. During the past 30 days, production has averaged 71.53 Bcf/d. During the same 30-day period last year production averaged 65.9 Bcf/d. This winter-to-date production is averaging 71.22 Bcf/d; last winter-to-date production averaged 66.09 Bcf/d," Genscape said.
Analysts see the market eventually being able to absorb the increase in production and recommend a long position in more deferred contracts. Teri Viswanath, director of natural gas commodity trading strategy for BNP Paribas, said for the moment that too much production is chasing too little demand, but "the demand-side balancing we envision should not only establish a floor for prices but will likely enable significant price recovery by year-end," she said in a report Friday.
In overnight Globex trading March crude oil gained 80 cents to $52.49/bbl and March RBOB gasoline added 2 cents to $1.5779/gal.