March natural gas is set to open 13 cents higher Monday morning at $6.26 as traders ratchet up once again expectations of bone-chilling cold expected to hit the eastern three-quarters of the nation. Overnight oil markets were mixed.
Over the weekend weather forecasts for the near term turned still colder. WSI Corp. in its morning six- to 10-day outlook said "Sunday's six-10 day forecast has trended colder across the interior Northwest, Plains and Midwest when compared to Friday's forecast. Forecast confidence is considered near average standards as models show generally good large-scale agreement, but there are a number of technical differences at play.
"Colder risks remain across the Plains up through the Midwest under a lobe of the touted 'polar vortex.' There are both warm and cold risks across the Northeast in through the mid-Atlantic States and are dependent on potential developing coastal low pressure systems."
WeatherBELL Analytics' Alan Lammey concurs and said "the weather forecasts are now predicting even higher levels of confidence of a return to much colder than normal temperatures starting this week. There is also growing confidence that the month of March may also be a colder month as well. While the March contract increased by nearly 18%, or 92 cents, recently, which is remarkable in itself, it could see a potential 'blow off top' prior to its expiry this week.
"The bulls remain in control, but they are becoming shorter term as the majority of the winter heating season is now in the history books. Further adding to the market volatility is the absence of short sellers from the market. Keep in mind that the March contract rolls of the board this week [Wednesday] and will be replaced by the April contract, which is an 'injection month' contract. Because of the seasonal dynamics and fundamentals at play, it doesn't appear that the April contract will attempt to converge or fill the $1.00+ price gap between the two contracts."
In its morning report, industry consultant Genscape said, "As bitter cold returns to the north-central U.S., Midwest demand is showing +2.8 Bcf/ to 15.2 Bcf/d from last Wednesday's 12.37 Bcf/d [and] due to cold weather rolling down the East Coast, Southeast demand has increased +1.0 Bcf/d to 11.8 Bcf/d from last Thursday's 10.8 Bcf/d."
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile is looking for the market [March contract] to test last week's value area at $6.241 to $5.965 and "then test $5.110 to $4.594 if time permits." He also cited a 2008 value area at $6.886 as a "long-term target."
In overnight Globex trading April crude oil rose 22 cents to $102.42/bbl and April RBOB gasoline eased a half cent to $2.9972/gal.