December natural gas is expected to open 8 cents lower Tuesday morning at $2.31 as longer-term weather forecasts turned milder and traders mull market support sustained by low cash prices. Overnight oil markets fell.
Extended weather forecasts overnight turned milder. WSI Corp. in its Tuesday morning report said, "[Tuesday's] 11-15 day period forecast is warmer over the East and colder over the western half of the nation. GWHDDs are down 5.3 for Days 11-14 and forecast to be 120.1 for the period. Forecast confidence is near average today as medium-range models are in better agreement throughout the whole medium range. However, the influence of WestPac tropical activity is a wildcard and source of uncertainty late in the month.
"The forecast has room to sway in either direction due to the timing of a frontal system, amplification of the pattern late in the period and any impacts from tropical activity. The East has more of a downside risk, while the West has more of an upside risk by the end of the period."
Analysts see the market supported by fuel-switching as long as cash prices hover in the $2 area. "[T]he bearish dynamic of supply surplus expansion will be sustained and will continue to mitigate the effects of the colder temperature outlooks," said Jim Ritterbusch of Ritterbusch and Associates in commenting on the week's anticipated storage build. "But at the same time, we will note that Friday's storage injection was again downsized against average industry expectations by a significant amount for about the fourth consecutive week. We feel that some structural shifts are evolving to downsize injections to well below levels that might be implied by HDD accumulations.
"Since we are not seeing dramatic shifts in production, we believe that changes are taking place on the demand side as utilities have been shifting away from coal and toward the gas alternative following the recent declines in Henry Hub spot pricing to around the $2 mark where cash values finished last week. Any continuation of this trend will be limiting downside possibilities in the futures, especially if expected colder trends prove sustainable."
Forecasts by the National Weather Service (NWS) show continuing below-normal heating requirements in major population centers. For the week ended Nov. 21, NWS predicts that New England will see 145 heating degree days (HDD), or 29 below normal, and the Mid-Atlantic, including New York, New Jersey and Pennsylvania, will experience 116 HDD, or 44 fewer than its normal seasonal tally. The greater Midwest from Ohio to Wisconsin should endure just 116 HDD as well, or 67 fewer than normal.
In overnight Globex trading December crude oil fell 56 cents to $41.18/bbl and December RBOB gasoline fell a penny to $1.2317/gal.