Daily GPI / Markets

Cooler Temps? No Problem; September Called 2 Cents Higher

September natural gas is set to open 2 cents higher Monday morning at $2.91 in spite of continued moderation in near-term temperature outlooks. Overnight oil markets were mixed.

Traders see the current supply demand balance as well as near-term cooler weather pressuring prices. "The oversupply of U.S. gas production, low domestic demand, and uncertainty of future natural gas exports led prices lower mid-week," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm in a weekly report to clients. "The weekly storage injection came in at plus 53 Bcf when they were expecting a build of plus 46 Bcf, which helped keep prices down. The cooler weather in the eastern half of the U.S. also continues to put pressure on natural gas prices.

"On a trading basis, we will hold our producer collars. We will watch for rallies up to $3.50 in the winter to add to our producer collars."

Weather forecasts cooled again. "Forecast changes were in the cooler direction when compared to both Friday and Sunday reports and focused in the Eastern Half," said MDA Weather Services in a morning report. "Temperatures on the cool side of normal are now forecast for most of this region, thanks to the presence of high pressure.

"There remains further risk to the cool side of forecast based on the models, particularly with the GFS Ensemble with more widespread and intense below normal coverage. The forecast trends warmer in the West, where above and much above normal temperatures are steady in coverage for the duration of the period. Confidence is moderate overall."

The Atlantic tropics continue active. In its 8 a.m. EDT report the National Hurricane Center (NHC) said the remnants of what used to be Tropical Storm Harvey could develop through Monday night while it moves west-northwestward at 15 to 20 mph near the coast of Honduras. It could become a tropical cyclone again before it reaches the coast of Belize or the Yucatan Peninsula early Tuesday. The remnants are expected to move into the Bay of Campeche on Wednesday, where redevelopment appears more likely due to more favorable upper-level winds. It pegged the probability of tropical storm reformation at 80% in the next 5 days.

It was also following a trough of low pressure located over the southeast and central Bahamas. It was moving to the west northwest at 15 mph and NHC said the probability of tropical storm formation in the next five days is 40%.

A third area of cloudiness and disorganized thunderstorms is located about 800 miles east-northeast of the northern Leeward Islands and is associated with a trough of low pressure. NHC put the likelihood of tropical storm formation in the next 5 days at 0%.

In overnight Globex trading September crude oil rose 3 cents to $48.54/bbl and September RBOB gasoline fell 2 cents to $1.6082/gal.

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