April natural gas is set to open 3 cents lower Tuesday morning at $2.67 as traders see a strong bearish case taking shape with the eventual end of heretofore market-rattling cold. Overnight oil markets rose.
Forecasters are still anticipating cold incursions, but analysts see diminishing temperature-related impacts going forward. "The latest weather data continues streaming in, and there are a few minor changes showing up. An active and exciting weather pattern is still on track this week as the last in a series of Arctic blasts sweeps across the central, southern and eastern U.S.," said Natgasweather.com in a Monday update. "It will be quite mild over the eastern U.S. the next few days ahead of the Arctic front, with many locations reaching the upper 60s and 70s over the Southeast, with 40s and 50s over the Northeast.
"There will still be additional weather systems grazing the upper Great Lakes and Northeast with sub-freezing temperatures into next week, which the weather data has trended slightly colder on, particularly around March 10th, which would still drive relatively strong heating demand. We expect high pressure to shift out of the West and into the central U.S. around then as well, which would result in temperatures warming above normal after March 11th, with warming then spilling into the eastern U.S. by the 13th to significantly ease national heating demand."
Traders are looking ahead to determine what the market impact of stout year-over-year gains is likely to be. "So, while allowing for two more large storage withdrawals as a result of extremely cold temperatures during the second half of February, it appears that this implied widening in the deficit against five-year average levels will come to a halt with the EIA reports that will be released during the second half of March," said Jim Ritterbusch of Ritterbusch and Associates. "We continue to emphasize that with the arrival of the new month of March, the temperature factor will diminish and focus will be forced to a near-record high pace of production where year-over-year gains of as much as 8-9% are still being seen.
"Looking out through the rest of this week, we look for warmer temperature trends to be prioritized over the weekly EIA releases as the market will be shifting attention to the upcoming shoulder period when non-weather related demand items will be coming under the microscope and speculative entities will be approaching the short side with more aggression absent the fear of being blind sided by another bout of extreme cold. This remains a market in which we find it much easier to construct a bearish rather than a bullish case and we continue to attach high probability to a price decline to the $2.50 area possibly within a one week- 10-day time frame. In conjunction with our negative views, we continue to expect some contango expansion into new wide territory with the front switch stretching out to at least 6 cents."
In overnight Globex trading April crude oil added 30 cents to $49.89/bbl and April RBOB gasoline gained 4 cents to $1.9385/gal.