April natural gas is set to open 2 cents lower Monday morning at $2.93 as weather forecasts show little change from the ongoing mild pattern and risk managers study the short side of the market. Overnight oil markets fell.
Overnight weather data is calling for a warm trend to close out March. "Unlike the prior two weekends, models mostly lost demand compared to their levels from Friday," said Matt Rogers, president of Commodity Weather Group, in a Monday morning note to clients.
"We see a general warm-prevailing pattern now to close out March, with the warmest anomalies most frequently across the southern tier of the U.S., triggering some slight early season cooling demand at times (like the 90 F we are forecasting for Dallas today). The West sees a period of cooler to colder weather with stormy conditions coming up this week into the six-10 day, but we are also detecting some warmer/drier trends returning later in the 11-15 day range."
Risk managers are positioning themselves for a price move lower. "Warmer than normal temperatures in the West and snow and colder temperatures in the East is keeping the gas market rangebound," said Mike DeVooght, president of DEVO Capital Management, a Colorado-based trading and risk management firm. "The weekly storage numbers were considered slightly negative because of a smaller than anticipated draw.
"On a trading basis, we continue to look for the market to run out of steam in the $3.05-3.10 [futures] level on the spot market. We think there is a good chance that we could test the lows of late February in the next few weeks. Large speculators steadily increased their long positions last week. We will hold current short positions for producers and will look to sell May at $3.15-3.20 for speculators.”
DeVooght currently advises end-users to stand aside and trading accounts to sell May futures at $3.15 to $3.20 should the opportunity arise. Producers and physical market longs should hold on to the remainder of an August 2016-July 2017 put strip at $2.70 offset by the sale of a $3.15 call at flat. Alternatively, he suggests a $2.75 put [strip] offset by the sale of a $3.75 call paying 7 cents.
In its Early View storage survey conducted Friday The Desk's survey of 10 traders and analysts estimated that Thursday's EIA storage report will to show an average withdrawal of 149 Bcf, well above last year's 13 Bcf injection and a five-year average pull of 21 Bcf. The survey had a range of -140 Bcf to -160 Bcf.
In overnight Globex trading April crude oil fell 78 cents to $48.00/bbl and April RBOB gasoline lost a penny to $1.5864/gal.