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It's Back; El Nino Seen by Mid-Month; February Called 6 Cents Lower

February natural gas is set to open 6 cents lower Tuesday morning at $2.27 as weather models call for the return of El-Nino-type patterns by mid-month. Overnight oil markets were mixed.

Forecasters Tuesday see a mixed pattern, but beyond the six- to 10-day period, weather models are again calling for a return of El-Nino-driven warmth. "[Tuesday's] forecast is somewhat of a mixed message as much of the U.S. sees colder changes for next week's cold air outbreak and then we see stronger support for significant pattern moderation as a warm Nino-forced pattern takes hold again," said Commodity Weather Group in its Tuesday morning report to clients.

"Colder changes for next week are fairly widespread and encompass the West (later six-10 day), the South, Midwest and East Coast (with some faster cold front timing) as an impressive high pressure area drops southward. This event still looks like a 'one-off' as the models continue to trend toward breaking down the western to Alaska ridging pattern to allow a warmer Pacific flow to take hold once more," said Matt Rogers, president of the firm.

Natural gas Monday for the most part avoided the turbulence in financial markets, and analysts don't see much market movement pending significant weather shifts or unexpected storage data. "The natural gas market provided a sea of calm amid extreme volatility seen across the rest of the financial and commodity spaces," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Tuesday to clients. "The fact that the gas is largely a domestic market contributed to today's comparatively tight trading range and negligible price change. Furthermore, most short-term temperature views that now stretch out to about the 18th of this month failed to show much of a shift from last Thursday.

"The first major cold air of the season that is expected to envelop most of the country next week has been largely priced in. So short of major changes in the weather forecasts or a shocker out of Thursday's EIA report, we see this market easily drifting into a consolidation phase within about the 2.20-2.40 zone through the rest of this week. We are still inclined toward the bearish side of this market, but we will continue to await possible advances into the 2.40-2.50 zone before probing the short side."

In overnight Globex trading February crude oil fell 5 cents to $36.71/bbl and February RBOB gasoline rose a penny to $1.2976/gal.

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