April natural gas is expected to open 6 cents higher Monday morning at $3.07 as traders factor in greater cold and higher heating loads for the upcoming week. Overnight oil markets eased.
For this week, overnight weather models show significant cold with lingering aftereffects. "The current workweek continues to aim for the coldest conditions of Q1 for the East Coast -- an impressive feat after a warm-dominated January and February," said Matt Rogers, president of Commodity Weather Group in a Monday morning note to clients.
"A strong winter storm enhances impacts, especially for the upper Mid-Atlantic to Northeast over the coming days. The six-10 day and 11-15 day still trend warmer; however, timing is slower and the re-warming is generally weaker than forecast by models last week. The result is lingering coolness toward the Eastern U.S. in the six-10 day as well as toward the Northeast in the 11-15 day."
The National Weather Service (NWS) for the upcoming week forecasts much above normal heating loads across major population centers. For the week ending March 18 NWS expects New England to shiver under 275 heating degree days (HDD), or 66 more than normal. New York, New Jersey and Pennsylvania are forecast to see 268, HDDs or 79 more than normal, and the greater Midwest from Ohio to Wisconsin is anticipated to endure 248 HDDs or 50 more than its normal seasonal tally.
The cold is expected to boost demand across the eastern third of the country, according to observers. "Demand should remain supported this week as the departure of the Nor’easter in Appalachia and New England will be trailed by an arctic cold front," said industry consultant Genscape in a Monday morning report.
"New England demand is nominated to 3.69 Bcf/d today and is forecast to run in the 3.5-3.6 Bcf/d range through Thursday before trailing off into next weekend. Appalachia demand is nominated at 16.27 Bcf/d today and forecast to rise to a peak of 18.55 Bcf/d by Wednesday. We show Southeast/Mid-Atlantic demand just shy of 17.7 Bcf/d today and rising to a Wednesday high of 20 Bcf/d. Demand in the Midwest and westward markets, meanwhile, is expected to run fairly flat to declining on mild weather and sustained high output from renewables."
Market technicians see a milestone in sight that could signal that the $2.52 low of Feb. 22 was the seasonal cycle low. "The progress continues," said Brian LaRose of United ICAP in closing comments Friday. "But bulls still have one more hurdle they must clear to signal $2.522 marked a seasonal low.
"That area of contention is $3.070-3.084. Will be looking for a more substantial retracement of the $3.994 to 2.522 decline over the next couple of months if the bulls can better this last band of resistance." LaRose noted that an average seasonal gain of 50% from $2.522 would target $3.783.
In overnight Globex trading April crude oil fell 23 cents to $48.26/bbl and April RBOB gasoline lost a penny to $1.6060/gal.