November natural gas is expected to open 4 cents higher Monday morning at $4.07 as traders discount moderate near-term weather and focus on the risks and rewards of a higher pricing environment. Overnight oil markets were mixed.

Even with a hefty increase in production, analysts aren’t willing rule out winter pride spikes. “The problem is that the Producing region has been used to an increasing degree to meet winter demand in the Midwest and Northeast markets,” said Teri Viswanath, director of commodity strategy for natural gas trading at BNP Paribas. “With stocks in the Producing region much below the five-year average and regional production in decline, there will simply be less supply available during the upcoming winter. Therefore, despite the incremental production gains in the Northeast, the prospect of another cold winter and the inflexibility of supply suggest to us that seasonal prices spikes are not off the table this winter.”

Near term weather forecasts are highly variable, but in the landscape of weather/natural gas trading there doesn’t seem to be much in the way of market moving events. Perhaps time to sell what little volatility there is. Commodity Weather Group in its morning outlook said “Changes from Friday were quite mixed with warmer changes dominating parts of the South (especially Texas side) and California (100s by this weekend in Burbank), while a stronger cool push dives into the Midwest and East later this week and weekend (days 5-7).”

“A warmer rebound next week varies by model and that is when the challenges really start. By the 11-15 day, the European ensemble has been showing a warmer pattern returning for the East and South especially with cooler risks shifting back north and west. The American and Canadian ensembles instead filter cooler air back to the East again after a much briefer, weaker warming interlude, ” said Matt Rogers, president of the firm.

“The results are bigger differences and low confidence for the 11-15 day. We took a blended approach with warmer Northeast, California, and Texas, but still a seasonal Midwest. Gains in HDDs later this week and then CDDs for Texas/California leads to a net demand increase today.”

Blended approach or not, forecasts of heating and cooling requirements for the upcoming week are far below normal for major population centers. The National Weather Service forecasts that for the week ended Oct. 4 Combined heating degree days (HDD) and cooling degree days (CDD) for New England will tally 39, or a whopping 32 below normal. The Mid-Atlantic is expected to see a total of 21 HDDs and CDDs or 38 below normal and the greater Midwest from Ohio to Wisconsin should only have to endure 34 total degree days, or 29 less than its normal tally.

Risk managers favor the long side of the market. “As we approach the heat season, there will be a reluctance to pressure the market on the short side,” said Mike DeVooght, president of DEVO Capital Management, a Colorado-based trading and risk management firm. “

“With the end of the [injection] season, we will be monitoring the winter contracts for an opportunity to initiate hedges for the winter months. We will be looking for a rally to the $4.50-5.00 level to do so. For speculators and long hedgers we would purchase the winter $4.20 calls and sell the $3.80 $3.90 puts,” he said in a weekend note to clients.

In overnight Globex trading November crude oil fell 32 cents to $93.22/bbl and November RBOB gasoline gained a penny to $2.4973/gallon.