October natural gas is expected to open 3 cents higher Tuesday morning at $2.98 as weather patterns post-Irma call for a warming trend in key markets. Overnight oil markets rose.
"A warm pattern is anticipated across the eastern half with aboves focused in particular across the south-central U.S. and to a lesser extent toward the East," said MDA Weather Services in its morning six- to 10-day report to clients. "There is model disagreement regarding the handling of a disturbance over central Canada. The favored Euro shows a more pronounced trough allowing for some moderating across the Midwest early, while the GFS and Canadian keep the disturbance weaker and further north and are subsequently warmer overall.
"There is a risk as per the Euro Op that greater warming could take place mid/late period as this disturbance departs," MDA said.
Traders see the warmth adding support to a market that offers few trading opportunities.
"Warmer temperature forecasts that are extending broadly across the U.S. appear to be driving much of the buying while demand destruction off of hurricane Irma also appears less than anticipated both in terms of magnitude and duration," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients. "However, sustaining this week's price rally is apt to prove difficult with the warmer temps stretching into the shoulder period when cooling degree day accumulation will likely be downsized by seasonal considerations.
"Following yesterday's ability to hold support at the $2.88 level, further price consolidation would appear to lie ahead within a trading environment more conducive to the writing of options rather than position type trades. And with a soft physical market that is well discounted against the screen, we also see few trading opportunities within the intra-market spreads. So, for now, we will maintain a sidelines stance but will review in the light of Thursday's storage release where we will be looking for about a 15 Bcf expansion in the supply surplus against five-year average levels."
In overnight Globex trading October crude oil rose 21 cents to $48.28/bbl and October RBOB gasoline added 2 cents to $1.6500/gal.