December natural gas was set to open about 6 cents lower Tuesday at around $3.10 as the market continued to pull back from last week's gains on mixed signals in the long-range weather outlook.
Bespoke Weather Services tallied a decline in gas-weighted degree days (GWDD) from the overnight weather guidance, with some continued disagreement between the models for the temperature outlook for later this month.
"After the market had priced in much of the medium- and long-range cold that we saw last week, it appears that a few GWDD losses are all that is necessary for prices to pull back, and given the potential for still warmer trends we see a bit more downside for prices as well," Bespoke said.
The market is likely to cycle up and down on the forecasts at this point in the season, FCStone Latin America LLC’s Tom Saal, vice president, told NGI Monday. Saal said he'll be looking at how far the retracement goes before the next cycle upward.
"If the market grinds down to the $2.98 area and fills" the gap in the chart from last week "then starts to move back up, you better tell your risk managers to be long."
Meanwhile, early indications are that the Energy Information Administration (EIA) could report the season's first withdrawal for the week ending Nov. 10.
Stephen Smith Energy Associates said in its Weekly Gas Outlook that preliminary estimates are for an 18 Bcf withdrawal.
"This week's projected draw of 18 Bcf compares with a seasonally normal weekly draw of 15 Bcf (using 2006-2010 norms)," the firm said. "The difference yields a storage surplus decrease of 3 Bcf, from a prior-week surplus of 150 Bcf to a projected Nov. 10 surplus of 147 Bcf (versus a year-ago surplus of 423 Bcf)."
December crude oil fell overnight and was set to open about 25 cents lower at $56.51/bbl, while December RBOB Gasoline was down 1.93 cents overnight to $1.7736/gal.