October natural gas is set to open 4 cents lower Monday morning at $2.91 as traders discount ongoing expectations of warm weather and look for a spot to initiate short producer hedges. Overnight oil markets were mixed.
Ongoing warmth continues to be the direction forecasters are taking. "While changes are mixed from Friday, the general themes of a warm-prevailing pattern look to continue," said Commodity Weather Group in a Monday morning report. "Mixed regional changes include a cooler Southwest and East Coast in the six-10 day compared to yesterday's outlook, while the Midwest to South edge warmer.
"A backdoor cooling complicates the Northeast, especially later this week into the weekend, which limits prior warmth potential. This seems to mainly kill off some late-season cooling demand rather than adding much early season heating concerns," said Matt Rogers, president of the firm.
Above-average cooling requirements are expected in major energy markets. The National Weather Service (NWS) forecast for the week ended Sept. 24 that New England would see 26 cooling degree days (CDD), or 25 above normal. New York, New Jersey and Pennsylvania were expected to have 35 CDD, or 27 above normal, and the greater Midwest from Ohio to Wisconsin was seen with 32 CDD, or 23 above normal.
Traders saw last week's strength as due in part to international developments. "The little rally [last] week was mostly due to supply disruption in Europe after there has been a growing number of earthquakes happening in the continent's biggest field, Groningen, in the Netherlands, due to the drilling activity there," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm. "Dutch regulators have imposed caps on natural gas output, and there could be some big cuts coming in European natural gas supply as they continue to evaluate seismic data in that field.
"The EIA storage number was considered neutral this week as they were expecting a build of 60 Bcf and they got a build of 62 Bcf. We still believe as we approach the end of the cooling season, we anticipate a sideways to lower trade over the next three to four weeks barring any major world event.
"On a trading basis, we will continue to use rallies approaching the $3 level on the spot market as an opportunity to establish producer collars with floors in the $2.50-2.75 range and a ceiling around the $4.00 level."
In its 5 a.m. EDT report the National Hurricane Center (NHC) reported that Tropical Storm Karl was 930 miles east of the Leeward Islands and was sporting winds of 40 mph. It was heading west at 15 mph and NHC projected a course towards Bermuda.
In overnight Globex trading October crude oil rose 59 cents to $43.62/bbl and October RBOB gasoline fell a penny to $1.4475/gal.