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Weather Models Increase Warmth; April Called Down 12 Cents

April natural gas is expected to open 12 cents lower Monday morning at $2.72 as weather models over the weekend predicted more intense warming. Overnight oil markets eased.

Weather forecasts turned warmer over the weekend. "The big story over the weekend is the extended duration and stronger intensity of the middle-month moderation, leading to general demand losses compared to Friday's outlook," said Matt Rogers, president of Commodity Weather Group, in the firm's morning forecast.

He added that earlier reports showing changes to more warmth "still stand this morning, but we are finally seeing some bigger trends toward the cooler to colder direction in the 11-15 day. There is an interesting disconnect, though, occurring between the upper-level patterns and the surface expectations on the various models. The guidance all shows a spiking new Alaskan-to-Yukon high-pressure ridge pattern, and most of them even introduce Greenland ridging (a rare sight); however, they do not show much cold at the surface yet.

"This may be due to a combination of the removal of the snow feedback, the introduction of spring, and some Pacific undercutting influences. Whatever the case, we believe the models are underestimating the colder weather return for late month."

Technical analysts see bulls having to prove their case. In a weekly analysis Walter Zimmerman, vice president at United ICAP, noted that last week the market did rebound form "critical $2.635 support on Tuesday and spent the remainder of the week chugging higher. Bulls need that chug higher to persist to have any case. Peg $2.980 to $3.035 pivotal resistance for natgas bulls, which brings up the point of sentiment. This is still a market full of speculative shorts. If natgas continued higher, it will not be thanks to the bulls. It will be thanks to frustrated bears.

"If $3.039 [Feb. 23] was a major peak then natgas should not be able to get above the $2.960-2.980. If $2.567 [Feb. 9] was a major low then natgas should not be able to get below the $2.690-2.670. The seasonal cycle favors the bulls."

In overnight Globex trading April crude fell 13 cents to $49.48/bbl and April RBOB gasoline shed a penny to $1.8739/gal.

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