August natural gas is set to open 6 cents lower Monday morning at $2.81 as forecasts call for a cooler East and Midwest and ridging shifts westward. Overnight oil markets drifted higher.
Commodity Weather Group in its Monday morning six- to 10-day outlook said, "A key test from over the weekend was passed as the effort to shift heat ridging back toward the West Coast late in the 11-15 day on Friday moved forward into the front half of that period over the weekend into [Monday]. This shift adjusts the Midwest and East in a cooler direction overall and contributes to some of the demand losses in today's outlook.
"Another demand loss contributor, though is a stronger-than-expected cool trough that cuts into the Midwest and East middle to late this week before lingering along the East Coast (as a cool wedge risk) this weekend into maybe even early next week (especially for the Northeast). Texas heat is on schedule, with last Friday's forecast with near 100 F in Dallas and mid-upper 90s in Houston. The Southeast shifts cooler, though, with more rain chances and the main heat concerns directed more toward the Tennessee Valley and Deep South areas instead," said Matt Rogers, president of the firm.
In the six- to 10-day period, cooler temperatures may prevail, but in the near term, cooling load is expected to be stout, according to National Weather Service (NWS) figures. For the week ending July 25, NWS forecasts that New England will see 70 cooling degree days (CDD), or 25 more than normal. New York, New Jersey and Pennsylvania should endure 75 CDDs, 16 more than normal, and the greater Midwest from Ohio to Wisconsin should swelter through 74 CDDs, or 16 greater than its seasonal norm.
Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm, said, "On a trade basis, it's difficult to make a case for a significant move, either up or down, in the gas market at this time. We will continue to stand aside and await future developments." He suggested that trading accounts, end-users and producers stand aside the market for now.
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile said, "A general rule in Market Profile is that the market (aka participating traders) wants to test the prior period's value area. This rule can assist participating traders in their hedge trading decision-making in different time frames. The 'daily' time period can be expanded to 'weekly' and 'monthly' time dimensions."
Saal expects the market to test last week's value area at $2.889 to $2.835 before moving on and "eventually" testing a second value area at $2.762 to $2.670.
In overnight Globex trading August crude oil rose 10 cents to $50.99/bbl and August RBOB gasoline inched up a penny to $1.9351/gal.