September natural gas is expected to open a penny lower Monday morning at $2.58 as analysts see expected weather demand as capping any concerted price advance. Overnight oil markets were mixed.
In a Monday morning report Harrison, NY-based Bespoke Weather Services said, "Despite bearish weather risk looking to outdo bullish risk in the coming couple of weeks, other bullish factors such as decreasing Canadian imports are similarly being priced in, and these may keep stronger support around the $2.52 level than previously expected. The result is thus that weather may not significantly drive price action through the week; though we still see it capping upside past $2.7-2.75 as confidence only increases that cooling demand falls back to at least average (if not below average) in the medium-range somewhere in that seven- to 10-day timeframe.
"Last evening we gapped down just a couple of cents and saw prices quickly bounce back towards even; when gaps fail like that it is often a sign of a reversal, as the gap showed the weekend bearish weather trends we were following but the quick jump in prices appeared to represent the tighter scrapes and other fundamentals that indicated more short-term support.
"Overnight, though, the operational GFS [Global Forecast System] lost even more weather-driven demand to show it likely coming in below average through the next 15 days; the most bearish risk continues to be in the 11- to15-day forecast, however, which remains relatively low confidence."
Market technicians are buying into the bearish case. "So far natgas has found support at $2.538-2.512-2.500, our A=C objective from $2.998. But is this a bottom?" said Brian LaRose, a market technician with United ICAP in closing comments Friday.
" We are not convinced. To even suggest $2.523 marked the end of an ABC pattern bulls will need to lift natgas up and over $2.704. If the bulls can not make that happen we would be prepared for a test of the $2.472-2.468-2.454-2.408-2.384 neighborhood after a brief pause."
In overnight Globex trading September crude oil rose 20 to $44.69/bbl and September RBOB gasoline fell a penny to $1.3658/gal.