September natural gas is set to open 4 cents higher Monday morning at $4.00 as traders see a test of the upper end of the recent trading range and mull whether a seasonal low is now in place. Overnight oil markets gained.
MDA Weather Services in its morning six- to 10-day forecast said the period "comes with mixed changes [Monday] and a marginally anomalous outlook as it features a transition in the pattern away from the cool-dominated look to a hotter than normal one by late in the period. The first half of period shifts cooler Midwest to East under lingering high pressure and lower than normal heights.
"But by late in the period a series of [load-killing] storm systems move eastward, breaking down high pressure as upper-level ridging grows and leading to a warm-up. Confidence is held down today due to uncertainty with the timing and intensity of this transition."
The firm said the first half of the period "carries cooler risks in the East to South while the second half carries hotter risks." It also said the central United States could become hotter within an active weather pattern.
In its Monday morning 20-day outlook, WeatherBELL Analytics forecasts a greater than normal accumulation of cooling degree days (CDD). For the next 15 days the U.S. is expected to see 64.7 CDD, more than last year's 56.6 CDD and an average of 49.8 CDDs, according to WeatherBELL figures.
Mike DeVooght of DEVO Capital said both trading accounts and end-users should stand aside. For those with exposure to lower prices, he said to hold what little is left of a short April-October summer strip initially established at $4.20 to $4.30 and also hold the remainder of a second summer strip established at $4.50. The summer strip settled Friday at $3.971.
Market technicians see the market needing to move higher to demonstrate a seasonal low is in place. "With natgas recouping all of Thursday's losses, the bulls are poised to start the week with a run at $3.998 (0.236)," said Brian LaRose of United ICAP in closing comments Friday. "Can they power through? If so, this will be our first piece of hard evidence in support of bottoming action. The next hurdle to clear in this case, a wide band of resistance stretching from $4.259 to $4.442. Bulls need to clear this zone to confirm a seasonal low is in place."
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile expects the market to test last week's value area at $3.967 to $3.879 before moving on a testing a second value area at $4.159 to $4.037. He added that the market will "maybe test" $4.422 to $4.326 "if time permits." He said technical buying is making an appearance.
In overnight Globex trading September crude oil rose 31 cents to $97.96/bbl and September RBOB gasoline gained as half cent to $2.7590/gal.