December natural gas is set to open a penny lower Monday morning at $2.14 after trading down to $2.05 overnight as forecasters note a return of milder weather by mid-December. Overnight oil markets were mixed.
Weather forecasters see signs the El Nino is beginning to take hold. Commodity Weather Group in its Monday morning report said, "Despite detail differences from Friday, the big picture view of temporary colder volatility and then warmer weather returning by the second week of December remains on track. The colder weather is not as strong when it hits the central to eastern thirds of the U.S. compared to original expectations (and the Western chill is not quite as strong as we forecast back on Friday), but it is faster coming East, which brings in some more [energy] demand to the holiday weekend.
"The transition to a warmer pattern focuses the biggest warmer changes to the northern half of the U.S., but it is not as fast and not as strong as the models indicated late last week. So we see a warm North and cool South for the 11-15 day -- a classic El Nino signature -- which is a pattern that is still net cooler than last year's big warm December story, but one that is also favored to return demand to below-normal levels," said Matt Rogers, president of the firm.
Risk managers with a small long position are ready to exit. Mike DeVooght, president of DEVO Capital Management, said in a weekend note to clients, "On a trading basis, we did take a small long position in the January contract. If we break the $2.10 level in the spot December contract, we will exit the position and stand aside."
He added that last week's action consisted of the market "start[ing] to break on expectations that the cold snap was not going to be enough to absorb the excess supplies in storage. The weekly storage number came in close to expectations, but the fact that we had a build at this time of year when we often see draws, helped to push the market lower."
At present, DeVooght is holding a long January futures position for both trading and end-user accounts at $2.50. For producers he suggests standing aside.
In overnight Globex trading January crude oil fell 33 cents to $41.57/bbl and January RBOB gasoline added a half cent to $1.2720/gal.