January natural gas is expected to open 7 cents higher Monday morning at $4.19 as traders turn their attention to forecasts calling for cold weather to impact Northeast and eastern markets. Overnight oil markets eased.
In important eastern markets the forecast turned colder over the weekend. WSI Corp. in its morning six- to 10-day outlook said "[Monday's] forecast has trended colder over the East and warmer over the interior Northwest and Plains/Midwest later in the period when compared to Friday's forecast. Forecast confidence is considered near average standards as models show reasonably good large scale agreement through day 10 with some localized technical differences."
Risks to the forecast include "models....expressing uncertainty with regards to the pattern over the East and a developing low-pressure system. Recent trends in the European op now support warmer temperatures when compared to [Sunday] over the East, with potential for a winter storm across the Northeast."
It's not just the cold, production is suffering. NGI reported that "Hundreds of natural gas and oil wells in prime producing areas of the U.S. onshore remained shuttered Friday afternoon after Winter Storm Cleon delivered snow and ice from the Bakken Shale into the Permian Basin and across the Midcontinent."
Western risk managers are utilizing the weather-driven market strength as a precursor to entering short hedges. "As sub-zero temperatures set over the Western U.S. on Thursday, prices for Friday gas flows at Opal pushed higher by $0.27," said Mike DeVooght, president of Colorado-based DEVO Capital Management. "This was only the beginning as Friday trading pushed Opal up to $6.07 for weekend gas flows...On a trading basis, we will look to add to our producer hedges if the balance of the winter reaches $4.30-4.40. We will sell next summer if the Nymex strip reaches $4.30-$4.40."
At present, DeVooght recommends that trading accounts and end-users stand aside. Producers and those with exposure to lower prices are advised to hold the balance of a short November-March strip established earlier between $4.50 and $4.60.
In its Early View Forecast Energy Metro Desk in a survey of 12 traders and analysts found an average 82 Bcf estimated for this week's storage report. The figure compares to last year's 8 Bcf pull and a five-year average of 76 Bcf.
In overnight Globex trading January crude oil fell 2 cents to $97.63/bbl and January RBOB gasoline eased a penny to $2.7204/gal.