June natural gas is set to open flat Monday morning at $3.01 as traders are looking closely at sell hedge programs to take advantage of recent price advances. Overnight oil markets rose.
Prices have risen to the point where risk managers are closely watching producer sell hedges. "Natural gas settled higher again this week. Temperatures have been warmer than normal on the East Coast, and this is supposed to continue for another week. Summer forecast have also called for above-normal temperatures this summer, which have also supported prices," said Mike DeVooght, president of DEVO Capital Corp. in a weekly note to clients.
"The lower than expected inventory build this week was supportive for natural gas, but there still was a large build of 111 Bcf. The market brushed off any bearish news and continued to draw support from the funds short-covering to correct what had been a significant oversold condition.
"On a trade basis, we are getting closer to levels ($3.00-3.20-front month and the deferred above $3.50) that producers with a significant amount of natural gas production should consider hedging a portion of their production. On a speculative, basis stand aside."
The National Weather Service (NWS) is looking for cool, wet conditions with temperatures below normal. "Precipitation, including some wet snowflakes, will continue to diminish across the Dakotas and northern Minnesota on Monday as a strong low-pressure system continues to track across northern Minnesota before reaching southwestern Ontario later in the day," NWS said in a morning report.
"In the wake of this system, dry and colder conditions will develop across much of the northern Great Plains and upper Midwest on Monday as cold high pressure drops south from Canada. Forecast highs are expected to be several degrees below normal across much of the region. Behind a well-defined cold front, this colder air is forecast to spread further to the south and east, with temperatures staying below their normal highs across much of the central U.S. and Midwest on Tuesday."
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile is looking for the market to test last week's value area at $2.987 to $2.843.
In overnight Globex trading June crude oil rose 61 cents to $60.31/bbl and June RBOB gasoline gained fractionally to $2.0458/gal.