April natural gas is expected to open 3 cents lower Monday morning at $1.79 as weather forecasts become more variable but fail to change the overall pattern of ongoing moderation. Overnight oil markets fell.
Weather models overnight showed more variability but nothing likely to prompt any significant changes to the ongoing pattern of overbearing warmth and moderation. Commodity Weather Group in its Monday morning report said, "The pattern situation over the next two weeks is more complicated and chaotic as we have seen a lot of detail drift on the modeling this past weekend. "[T]he six-10 day is not very distinct with a near-normal lean in many areas.
"The upper level teleconnection indications favor a cooler risk overall to both periods with a main focus in the middle third of the U.S., but the European ensemble did manage to trend more notably warmer overnight for the 11-15 day, which is a reasonable risk given continued chances for undercutting Pacific energy that offers warmer westerly flow, too. None of these model options match the ferocity of the super-warming we have experienced over the month so far...However, at this very last-minute of the heating season, overall normal demand is diminishing fairly rapidly via climatology."
Observers considered last week's rise a result of short-covering. "We feel the strength is due to primarily short-covering, rallying in sympathy with commodities in general, especially the energy complex," said Mike DeVooght, president of DEVO Capital, in a weekend report to clients. "The EIA storage numbers [last] week showed a smaller than expected draw, but the news failed to stop the natural gas from rallying to new monthly highs. The warmer than normal weather is also giving the natural gas market some strength as demand for the cooling season is expected to be better than last year.
"On a trading basis we are standing on the sidelines for now."
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile is looking for the market to test last week's value area at $1.788 to $1.698 before "eventually' testing $1.999 to $1.947 and $2.223 to $2.084.
In overnight Globex trading April crude oil fell 96 cents to $37.54/bbl and April RBOB gasoline gave up 2 cents to $1.4202/gal.