July natural gas is set to open 15 cents lower Monday morning at $2.90 as overnight weather models forecast much more moderate temperatures for the Midwest. Overnight oil markets rose.
"This June has been enormously difficult to forecast thanks to a highly variable pattern," said Matt Rogers, president of Commodity Weather Group. "A very cool start transitioned to a hot middle and it is now flipping back cooler before month's end."
The general weather theme of greater than normal temperatures for June is taking a hit. "The models have struggled with both sides of this equation with so many moving parts. For this morning, they at least agree on the coolest 6-10 day anomalies in the Midwest, but they vary on intensity with the European being the strongest and American weakest again (while some heat lingers along the East Coast). The 11-15 day continues to be a big battleground though with the European and Canadian so variable and mixed with their members that the whole nation is close to normal on the means."
AccuWeather.com forecasts that next week high temperatures for Chicago and Detroit will be between the mid 70s to mid 80s, right at seasonal norms.
Near term, however, major population centers are expected to see above-normal cooling loads. The National Weather Service forecasts that for the week ended June 24, New England will see 57 cooling degree days (CDD) or 38 greater than normal. The Mid-Atlantic should experience 64 CDD or 31 above its normal seasonal tally, and the greater Midwest from Ohio to Wisconsin is expected to endure 44 CDD or 5 greater than normal.
Risk managers see the likelihood of lower prices. "Natural gas settled slightly lower after trading in a two-sided choppy range for most of the week," said Mike DeVooght, president of DEVO Capital in a weekly note to clients. "Mid-week, natural gas broke to test a key support level ($2.90). When support held, natural gas rebounded when the weekly storage number showed a smaller than anticipated injection.
"On a trading basis, we still feel there is a good chance of testing the $2.80-$2.90 level on the spot market in the next few weeks. We will continue to hold our current positions."
In overnight Globex trading July crude oil rose 9 cents to $44.83/bbl and July RBOB gasoline gained fractionally to $1.4583/gallon.