January natural gas is expected to open unchanged Monday morning at $2.21 as near-term weather forecasts continue their mild pattern and the technical pattern shows little change. Overnight oil markets rose.
Weather forecasts continued to gravitate to a milder outlook. In its Monday morning report, WSI Corp. shows the entire country in both the six- to 10-day and 11- to 15-day time frames ranging from normal to much above normal. "The latest six-10 day period is similar to Friday's forecast. The northern and eastern U.S. is a little warmer. The southwestern U.S. is a little cooler. GWHDDs are down 1.6 to 105.5 for the CONUS.
"Forecast confidence is a little above average as medium-range models are in good agreement and have been consistent with the development of a mild pattern. The details with a series of cut-off systems offer some localized uncertainty and a downside risk across the southern half of the nation. The northern Rockies and northern tier could run even warmer."
The moderating weather patterns haven't deterred risk managers from probing the long side of the market. Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm, said in a weekly report 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."
December futures settled Wednesday at $2.206 after trading as low as $2.133. DeVooght advises both trading accounts and end-users to hold on to the long January position at $2.50, but producers should stand aside.
Market technicians don't see any immediate movement either higher or lower. "[We] see the January contract facing the same challenges that the December contract did when it rolled into the spot position," said Brian LaRose, a market technician with United ICAP. "To build a case for long-term bottoming action bulls need to push natural gas above $2.441, 2.547-2.557-2.563 and 2.723. To keep the down trend intact, bears need to crack the two recent lows at $2.051 and $1.948. In between we are stuck in neutral territory."
In overnight Globex trading January crude oil rose 44 cents to $42.15/bbl and January RBOB gasoline gained fractionally to $1.3400/gal.