November natural gas is set to open 2 cents lower Tuesday morning at $2.51 as traders factor in a slight warming trend. Overnight oil markets were narrowly mixed.
In the latest weather model runs forecasters noticed a slight shift to more temperate conditions. Commodity Weather Group in its Tuesday morning report to clients said, "Slightly warmer changes to the Midwest and East for the six-10 day as well as from Texas to the Midwest for the 11-15 day lead to some slight demand loss estimates overall.
"The strongest cool push of the season so far is still expected to impact the Midwest and East later this week into the weekend with some lingering effects on Monday for the East Coast. While Boston should see 30s for lows (Sunday-Monday range), even NYC could dip close to those levels."
In spite of the market's recent trek above $2.50, analysts don't see any further gains. "This market is having difficulty maintaining some weather-driven price gains above the $2.50 level per nearby futures, and we now see downside risk exceeding that to the upside by a sizable margin," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients. Occasional cold spells will be inevitable going forward but will not be translating too much elevation in HDDs [heating degree days] during this fall period.
"With production still holding strong year-over-year gains in excess of 4% despite the past year's plunge in the rig counts, we feel that surprises within the weekly storage figures are more apt to prove bearish than bullish. As far as this week's data is concerned, we are expecting a 95 Bcf injection that would be proximate to last year's 96 Bcf increase but above the five-year average of about 87 Bcf. This implied additional increase in the surplus against average levels still represents a bearish dynamic in our view that will be limiting additional upside price follow-through."
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile expects the market to test the September value area at $2.734 to $2.592. "Some buying pressure appearing to develop...looks like short-covering by professional speculators. Remember, only participating futures traders can influence the price of natural gas futures," he said in a Tuesday morning note to clients.
In overnight Globex trading November crude oil gained 19 cents to $47.29/bbl and November RBOB gasoline eased fractionally to $1.3408/gal.