The expiring December natural gas futures contract is expected to open 10 cents higher Monday morning at $3.19 as weather trends continue to favor cooler regimes going forward while production and drilling lag. Overnight oil markets rose.
Overnight weather models turned colder in the more extended time frames. "Trends were in the colder direction across a wide portion of the U.S. in this period, but confidence remains rather low as it relates to the MJO [Madden Julian Oscillation] and whether models are portraying its evolution correctly," said MDA Weather Services in its Monday morning 11-15 day outlook. "The forecast gives consideration for the signal to be propagating from its current phase three toward phases four/five about this time. These are warmer correlating phases for the Eastern Half, and the forecast fades the colder models here as a result.
"The Pacific regime that results from these phases can be characterized by the -PNA [Pacific North American oscillation], which has a focus for colder air being in the Rockies and Pacific Northwest.
"Models highlight colder risks in the Eastern Half, with this likely related to models allowing for some MJO reemergence into phases one/two. Risks are mixed in the West."
The bullish case continues to be enhanced by a slow response by the production community and near-term production losses.
Rig counts inched higher before the Thanksgiving holiday but continue to lag year-ago and long-term averages. Gas drillers added two rigs and oil operators raised three for the week, Baker Hughes Inc. said Wednesday. Overall, the North American total rig count was down by five week/week to 767 from 772, and it declined from 928 in the year-ago period. The five-year average is 2,020.
The number of U.S. rigs drilling for gas stood at 118, 71 fewer (38%) than a year ago. There also were 474 oil rigs in operation, down 81, or 15%, year/year.
"Spring Rock daily pipe production data shows Lower 48 production slipped during the holiday weekend but is gradually recovering," said industry consultant Genscape in a Monday morning report. "We noted on Friday that the production declines were primarily a result of -- what we believe to be -- maintenance in the Gulf of Mexico at the Lucius and Hadrian platforms.
"Discovery Gas receipts from the nearby KCC to Junction meter fell to just 9 MMcf/d on Thanksgiving, after having averaged 440 MMcf/d in the preceding 14 days. Nominated volumes were fully restored by Sunday."
In overnight Globex trading January crude oil rose 35 cents to $46.41/bbl and January RBOB gasoline gained a penny to $1.3884/gal.