February natural gas is set to open 4 cents lower Monday morning at $2.30 as traders tweak forecasts to accommodate a lower level of near-term heating demand. Overnight oil markets rose.
Weather forecasters are calling for a near-term counter-intuitive expansion of cold weather along with reduced heating requirements. In its Monday morning six- to 10-day outlook WSI Corp. said, "[Monday's] six-10 day period forecast features the expansion of below-average cold. The forecast is warmer than Friday's forecast across the southern and eastern U.S., [but] the northern Rockies and north-central U.S. are sharply colder. CONUS GWHDDs are down 3.6 to 153.2 for the period. Forecast confidence is average today as models are in good agreement with the pattern change and influx of arctic air into the central and eastern U.S. However, there are typical technical and timing differences.
"The central U.S. has a small risk to the colder side during the front half of the period, while the cold risk shifts into the East by the end of the period."
Rusty Braziel, in "The Top Ten RBN Energy Prognostications for 2016 -- Year of the Monkey" points to several natural gas-related issues. Not the least of which is "Marcellus gas still a problem. Good grief! What a massive understatement for 2015. The average NGI Tennessee Zone 4 Marcellus natural gas price for December 2015 was $0.99/MMBtu. That's not the basis. That's the price.
"There is a market share battle coming to Henry Hub natural gas. Sadly for gas producers, this one happened right on cue. Natural gas production in the Marcellus/Utica continued to grow, the volumes competed successfully with Southeast/Gulf volumes for market share (based on lower per-unit production cost and expanding takeaway pipeline capacity). Throw in El Nino and it was a recipe for gas-on-gas competition resulting in prices below $2.00/MMBtu in December."
Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm is currently standing aside the market for all types of accounts, trading, end user, and producer. "We will continue to monitor the market for an opportunity to establish short hedges," he said in a morning note to clients.
Tom Saal, vice president at FC Stone Latin America LLC in Miami in his work with Market Profile and other analytical tools said in a Monday note to clients "Santa Claus left end-users a present under the tree..a textbook bottom pattern on the long-term monthly bar chart. Also, bullish divergence on the Slow Stochastics technical study. Rising interest rates should increase forward curve."
In overnight Globex trading February crude oil rose 68 cents to $37.72/bbl and February RBOB gasoline rose 3 cents to $1.3013/gal.