March natural gas was set to open Tuesday about 3 cents lower at around $2.722, with a disappointing mid-February forecast and strong production still weighing on the market.
The latest overnight weather data continued to show mid-February cold coming in less impressive than predictions from a week or two ago.
In its six- to 10-day outlook Tuesday, Radiant Solutions noted mixed changes “largely based on tendencies in the model sot cut off low pressure in the Southwest. The results are colder changes in the West under more variability but a downstream warmer response in most of the Eastern Half.
“Overall, this remains a period that leans on the cold side of normal in the Midcontinent, with the coldest conditions forecast early here as high pressure dives into the Plains, including Texas, and the Midwest,” the firm said. As the system “presses eastward, cold intensity weakens, and all of the East Coast averages the period in the above normal category.”
NatGasWeather.com pointed to overnight data coming in “a touch milder” for mid-February. “The next opportunity for a colder pattern still won’t be until near or after Feb. 19-20.
“Of course, there’s still two weather systems/cold blasts to play out across the northern and eastern U.S. this week for strong demand, but then with the frigid Arctic cold pool retreating well north into Canada Feb. 12-18 and where the markets clearly see the pattern disappointing.”
Recent production data showing volumes surpassing 78 Bcf/d is also likely weighing on prices, the firm said.
Meanwhile, predictions have started rolling in for Thursday’s Energy Information Administration storage report.
Stephen Smith Energy Associates in its preliminary estimate Monday predicted a withdrawal of 123 Bcf for the week ending Feb. 2. The 123 Bcf draw would compare with a seasonally normal weekly withdrawal of 153 Bcf based on 2006-2010 norms, according to the firm.
PointLogic Energy in a note to clients Monday estimated a 116 Bcf withdrawal for the period, 17 Bcf larger than the prior week’s pull based on colder weather in the East and Midwest.
From a technical standpoint, ICAP Technical Analysis analyst Brian LaRose said following Monday’s 9.9-cent sell-off that $2.730, $2.640 and $2.521 are “the only support candidates standing in the way of a dump to $2.189-2.121.
“Even if natural gas can bounce off one of these levels I am not confident we will see anything more than a bear market correction at this point,” LaRose told clients. “I suggest keeping a close watch on the intraday technicals for any signs a pop higher may be in the works.”
March crude oil was set to open about 78 cents lower at around $63.37/bbl, while March RBOB gasoline was down around 3 cents to $1.8168/gal.