June natural gas is set to open 3 cents lower Tuesday morning at $2.79 as traders navigate an unsupportive weather environment, but at the same time see the market a 'buy' at $2.50. Overnight oil markets firmed.
Some top traders are waiting for prices to advance another 10 cents in order to initiate sales. Jim Ritterbusch of Ritterbusch and Associates says his trading stance "remains short term bearish and long term bullish while we continue to see the $2.50 level as a threshold where we will be shifting back to a bullish stance. Any accounts that may have acquired some long holdings on the brief dip to below the $2.50 mark at the beginning of last week would be advised to accept profits at current levels. As a matter of fact, we will look to begin approaching the short side of the summer contracts should July futures advance further into the $2.90-3.00 zone."
However, he admits that "this market remains quite resilient in the face of seemingly negligible support from the weather factor and a renewed expected upside acceleration in storage beyond this week's report. We are looking for a 70 Bcf injection this week that won't vary appreciably from the five-year average increase of 68 Bcf. But, while the recent steady contraction in the supply deficit against normal levels will be stalling with this week's number, we look for some triple-digit builds, possibly through the rest of this month to ultimately push this market back into new low territory."
Long term bullish might have to mean extended long term if analysts at Raymond James & Associates are correct. In a report Monday they said "North American natural gas demand growth is shaping up to be modest this year and again in 2016, as speculators wait for industrial projects to be completed and exports to become reality.
"The disappointment in demand growth isn't limited to one industrial sector, said the Raymond James report, but in all of the 'key categories' of incremental gas demand: fertilizer, ethylene, methanol and gas-to-liquids (GTL). Growth is well below expectations, with some projects now delayed and others canceled. Among other things, large GTL projects, costing many years to build and billions to finance, are being dropped in favor of smaller complexes" (see Daily GPI, May 4).
In overnight Globex trading June crude oil vaulted $1.29 to $60.22/bbl and June RBOB gasoline rose 2 cents to $2.0560/gallon.