January natural gas is set to open 4 cents lower Tuesday morning at $3.35 as overnight weather runs show less cold and market technicians see further weakness. Overnight oil markets rose.
Overnight weather models once again turned milder. "The forecast undergoes a significant shift to the warmer direction with widespread much aboves now expected across much of the Midcontinent and South into the Mid-Atlantic," said MDA Weather Services in its morning six- to 10-day outlook.
"The largest changes take place early in the period as models show good agreement with regard to the placement of an area of low pressure over the northern Plains that draws unseasonably warm air out ahead of it into the Midwest and South early and the East mid-period. In general, models are in good agreement with regard to the broad warmth across the eastern half, although the Euro is warmer than the GFS [Global Forecast System] across the northern tier."
That warm-up is likely to be good news for producers who have seen recent cold impacting production. "Production curtails remain in Texas, Oklahoma, Permian New Mexico, San Juan and the Rockies," said industry consultant Genscape in a Tuesday morning report.
"Spring Rock Daily Pipe Production data indicates there is roughly 1.63 Bcf/d offline with the current cold. Estimated freeze-offs peaked Sunday near 1.9 Bcf/d, [and] total disruptions since Dec.7 sum up to about 9.5 Bcf. The largest daily impacts have been in Texas and the New Mexico Permian. But the largest cumulative impacts have been in Denver-Julesburg and Bakken, where volumes have shown daily disruptions since the 7th [of December]."
Market technicians see little to indicate the present downtrend in prices is likely to abate any time soon. "While natgas was able to drift higher Monday, the only hint of bottoming action comes from a slight momentum divergence," said Brian LaRose, a market technician with United ICAP, in closing comments Monday.
"That is it, not compelling enough for us to seriously entertain bottoming action. So unless the bulls can build on the divergence Tuesday, we are still looking at further downside this week. As a reminder, $3.307-3.250, $3.162-125 and $3.016 are our candidates for support."
In overnight Globex trading the expiring January crude oil contract gained 29 cents to $52.41/bbl and January RBOB gasoline added a penny to $1.5768/gal.