February natural gas is set to open 3 cents higher Tuesday morning at $2.19 as traders try to reconcile a bearish outlook with weather forecasts calling for cooler temps in the medium term. Overnight oil markets were mixed.
Forecasts out toward the middle of February call for a cold East and warm West. WSI Corp. in its Tuesday morning report said, "[Tuesday's] 11-15 day period forecast now features below-average temperatures over the eastern half of the nation and above-average temperatures over the western half. Today's forecast is colder over the eastern two-thirds of the nation. GWHDDs are up 6.3 for days 11-14 and are forecast to be 145 for the whole period. Confidence in the forecast is only average, at best, as there is better model support for cold over the eastern half of the nation.
"However, there are key technical differences with the pattern and the corresponding anomalies. The eastern two-thirds of the nation has a risk to the colder side. This is especially the case if the GFS [Global Forecast System] guidance comes to fruition as it depicts an amplified EPO [Eastern Pacific Oscillation] driven pattern."
Traders are still maintaining a bearish posture for now. "This market is proving to be one that is very difficult to keep down as intraday selloffs of some 2-3% are usually being followed by a recovery into the plus column," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday. "While the temperature guidance when looking out to the first of February looks skewed decidedly in favor of above-normal temperatures at the start of the week, the market reacted to some shifts toward cold temps within some of the noon models.
"The market is also looking ahead to an unusually large storage draw to be reported on Thursday. We feel that a decline in excess of 200 Bcf has been largely priced in and that daily updates to the short-term temperature views will be guiding prices through the rest of this week. We are maintaining a bearish stance for now and would suggest holding short March contracts established last week in the $2.16-2.19 zone as we expect a test of last week's $2.04 lows as a minimum when looking across the coming week."
In overnight Globex trading March crude oil added 14 cents to $30.48/bbl and March RBOB gasoline lost a penny to $1.0418/gal.