October natural gas is set to open 3 cents higher Wednesday morning at $3.08 as traders mull the continued convergence of warm weather, nuclear outages and production losses. Overnight oil markets rose.
Industry consultant Genscape contends that "there haven't been any obvious shifts to fundamentals. The prompt contract picked up $0.11, while the winter strip added $0.08. It is possible forwards followed cash higher, as Henry Hub also added $0.11, with many Midwest, Texas and eastern hubs following suit. There was word that cash rallied in response to sizable intraday revisions to power burn nominations. As we noted Monday, burn levels have remained elevated this month due to a combination of above-normal temperatures and sustained coal-to-gas switching price levels".
For the next seven days, Natgasweather.com forecasts that the warm temperatures, particularly in the South, will eventually give way. "High pressure continues to dominate the southern U.S. with very warm highs of upper 80s to 90s. Across the Great Lakes, Mid-Atlantic and Northeast, comfortable temperatures of 70s to lower 80s will continue. A weather system will bring showers and cooling over the west-central U.S. late in the week where highs will only reach the upper 50s and 60s to drive light early season heating demand. Cooling will then spread into the southern Plains and Texas this weekend to ease current hot conditions.
"Also of interest, a shot of cooler Canadian air is expected over the Northeast late this weekend into early next week, focused over New England to bring light cooling demand."
Genscape sees a gradual easing of power burn. "On the demand front, this [weather] is expected to equate to gradual declines. Our forecast for New England has demand declining daily to a low of 1.77 Bcf/d on Saturday, and Appalachia bottoms out Saturday at 5.9 Bcf/d. Southeast/Mid-Atlantic reaches its low on Sunday at 12.85 Bcf/d. And Midwest demand is expected to reach a low of 7.12 Bcf/d on Sunday."
In overnight Globex trading November crude oil gained 84 cents to $44.89/bbl and November RBOB gasoline rose 3 cents to $1.3544/gal.