December natural gas is set to open 6 cents higher Monday morning at $2.83 as weather models for the near term dial up a more seasonal outlook. Overnight oil markets were mixed.
Near-term overnight weather models turned sharply cooler, though the mild trend continues. WSI Corp. in its Monday morning six-to 10-day forecast said, "[Monday's] forecast is much cooler than Friday's forecast across the East during the start of the period but is warmer late. As a result, CONUS GWHDDs are up 4.9 to 67.5 for the period. These are 24.4 below average.
"Overall forecast confidence is average but decreases during the end of the period as models begin to diverge with a pattern transition and potential storm system. The forecast has room to sway in either direction given the model spread and inherent uncertainty with a storm system during a changeable period. The ECMWF [European Model] camp offers some downside over the Midcontinent, but the East and West Coast have some upside.”
The Desk's Early View storage estimate for the week ended Nov. 4 revealed an average 55 Bcf from a sample of 13 traders. Last week 54 Bcf was injected and last year 55 Bcf was injected. The five-year average comes in at 38 Bcf.
Analysis of Friday's open interest figures in the CFTC Commitments of Traders report shows lingering longs despite the price decline of the last two weeks. Observers see a likelihood of further selling based on a high level of long exposure.
"Money managers sold 57,329 contracts of natural gas in the week ended Nov. 1," said Tim Evans of Citi Futures Perspective. "This further reduced the largest net long exposure since July 2014, but the market remains fairly overbought with risk of a further cycle of selling in our view.
Analysts are optimistic Cal '17 can recover from the recent price purge.
"We are watching for when the year-on-year storage surplus transitions into a deficit to trigger our move of risk bias from bearish back to bullish. Our current balance outlook has that inflection materializing in December. Early winter weather remains a critical wildcard," said Breanne Dougherty, an analyst with Societe Generale, in a Friday report."
"That being said, our other high conviction call for a Cal '17 price average of $3.50/MMBtu is still very much intact."
In overnight Globex trading December crude oil rose 46 cents to $44.53/bbl and December RBOB gasoline fell a penny to $1.3720/gal.