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December natural gas was set to open about 5 cents lower Monday at around $3.16 after weekend shifts in the weather models pointed to warmer risks for later this month.
After gaining throughout last week and settling above $3.21 Friday, the December contract gapped lower Sunday evening and was trading in the $3.15-3.17 range in the early morning hours Monday.
Bespoke Weather Services in a morning update attributed the pullback to bearish risks developing late this month, even as the outlook shifts cooler in the medium-term.
"As expected, weather guidance over the weekend added some gas-weighted degree days (GWDD) in the medium-range but moved toward a more bearish look in the long-range, with an increase of ridging risk across the center of the country," Bespoke said. After weekend changes to the weather models "GWDDs still remain around climatological average for the next 15 days, though it is clear long-range bearish risks have increased over Friday."
Noting that December natural gas "gapped down weakly" Sunday, Bespoke said while it sees "any dip here as a long-term buying opportunity, it was clear that very bullish weather expectations were propping prices up last week."
NatGasWeather.com said the models point to "cold blasts into the northern and east-central U.S. next weekend and again a few days later around Nov. 23-24 for periods of strong heating demand, but still with important details regarding exactly how cold in need of refining.
"The data remained mixed on whether additional systems will follow into the East in the last five days of the month or if warm high pressure will build in," the firm said. "Just like last week, the Global Forecast System weather model remains the colder model, this time on the after-Nov. 25 pattern compared to the rest of the data that is notably milder."
In a note following Friday’s close, ICAP Technical Analysis analyst Brian LaRose said after breaking through resistance last week the next challenge for the December contract would be the $3.279-3.432 area.
“However, my concern here is not price, it is sentiment,” he said. “The Market Vane bullish consensus reading is testing the upper bounds of the triangular-shaped containment zone. The last four attempts to break above this resistance line have resulted in failure. A breakout here could mark a significant turning point.”
December crude oil added about 9 cents over the weekend to $56.83/bbl, while December RBOB Gasoline was up fractionally to $1.8169/gal.