September natural gas is expected to open 3 cents lower Wednesday morning at $2.67 as forecast heat is seen giving way to cooler trends. Overnight oil markets were mixed.
Forecasters saw an overall change in the models overnight showing less energy demand. "All models lost demand overnight, but we still see major disconnects among them as the European ensemble retains a much warmer position for both six-10 (with slower and weaker cold front) and 11-15 day (keeping warmth on East Coast)," said Matt Rogers, president of Commodity Weather Group, in a morning report to clients.
"Changes were mostly on the minor side today for the six-10 day, but they were slightly warmer for the Midwest to East, while slightly cooler (wetter) for the South. In the West, we see some cooler Southwest changes and hotter changes for the Pacific Northwest by especially the second half of the six-10 day. The 11-15 day changes are marginally cooler overnight, especially toward the Midwest, but slightly toward the East Coast, too, as we head toward middle September and cooling demand weakens climatologically, too."
Weather models may continue to show near-term heat, but looking further out the heat is not expected to last long enough or be intense enough to drive market-moving weather changes. "We continue to view bigger picture weather patterns as moderately bearish, especially looking out past this weekend as we continue to see stronger Canadian cool blasts making attempts at pushing into the northern U.S., which would ease national cooling demand for next week, and even more so during approaching the middle of September," Natgasweather.com said in a morning report.
"The warm high-pressure ridge over the eastern U.S. may try to regain ground briefly for a day or two in between northern and central U.S. weather systems, but it's not looking to become quite strong enough to bring intense heat..."
Technical analysts aren't willing to push the bearish case much further given market seasonality. "Still inclined to label this congestion as rest stop in a continuing down trend," said Brian LaRose, a market analyst with United ICAP. "Assuming the bears can crack $2.624 this week the "a"="c" objectives from the $3.105 high will be our next downside targets. 0.618 of "a"="c" targets $2.595-2.585-2.541. "a"="c" targets $2.443-2.385."
He admitted to also calculating lower targets, but "given the seasonal cycle this is as bearish as we are willing to get at this time," he said in closing comments to clients.
A weakening Tropical Storm Fred was located 470 miles west-northwest of the Cape Verde Islands the National Hurricane Center said in its 5 a.m. EDT report. Winds had lessened to 45 mph and the storm was headed west-northwest at 10 mph. Projections showed the storm headed toward Bermuda.
In overnight Globex trading October crude oil fell 63 cents to $44.78/bbl and October RBOB gasoline gained a penny to $1.3062/gal.