October natural gas is expected to open 4 cents lower Tuesday morning at $2.75 as traders discount current warmth in favor of expected weather moderation. Overnight oil markets were mixed.
Forecasters are still calling for elevated temperatures extending out the next two weeks. "[Tuesday's] 11-15 day period forecast is warmer than yesterday's forecast across the Rockies and central U.S.," said WSI Corp. in its Tuesday morning report. "The East is a bit cooler. CONUS PWCDDs are only down 0.1 for days 11-14 to 25.6 for the period. Forecast confidence is considered average. Medium-range models are in modest agreement with the pattern, but the pattern becomes less defined with no strong signals, [and] the Tropics also offer some uncertainty.
"A weakening pattern and potential WP-like pattern over the Pacific offers some downside along the East and West Coasts. The interior West and central U.S. have some minor upside potential."
That forecast is not enough for some bulls. "This market has begun the new week under further downside price pressures largely related to weekend adjustments within the weather factor," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients. "Hot temperatures that had supported values into early last week have seen a significant shift, with the Midcontinent expected to see normalization within the consensus of updated six-14 day views. While normal temperature trends may appear price-neutral, such patterns at this time of the year tend to associate with limited air conditioning requirements and, hence, a downsizing in electricity generation demand.
"This will be boosting storage injections going forward despite the current hot spell that is keeping physical Henry Hub pricing at around a 10-cent premium to the nearby screen. This, in turn, is keeping the fall-winter portion of the gas curve quite stout, with the front switch trading at about an 11-cent contango compared to about a 23-cent carrying charge last spring. This comparatively narrow spread could be increasing the attraction of investment type speculative longs into the market as roll yields are not as much a deterrent as was the case earlier in the summer."
At 8:00 a.m. EDT, the National Hurricane Center reported that the center of Post-Tropical Cyclone Hermine was about 95 miles south of the eastern tip of Long Island. The post-tropical cyclone was moving toward the west at near 6 mph, and a decrease in forward speed was expected later Tuesday. Hermine was expected to become nearly stationary by Tuesday tonight. A turn toward the northeast was forecast to occur on Wednesday. Maximum sustained winds remained near 65 mph, with higher gusts. Gradual weakening was forecast during the succeeding 48 hours.
In overnight Globex trading October crude oil fell 19 cents to $44.25/bbl and October RBOB added a penny to $1.3097/gal.