August natural gas is set to open 3 cents higher Tuesday morning at $2.82 as traders look ahead to an expected lean storage build as the current intense heat event limits additions to inventory. Overnight oil markets were mixed.
According to market technicians, August futures would have to move either 8 cents lower or 12 cents higher to pique their interest. "So far, natural gas has managed to bounce in front of $2.710," said Brian LaRose, a market technician at United ICAP, in closing comments Monday. "The question now, can the bulls clear resistance at $2.914 and shift the technicals back in their favor? If so, there is hope for further upside. If not, the A=C objectives from the $3.105 high will be our next downside targets; 0.618 a=c cuts at $2.612; a=c cuts at $2.402. Between $2.710 and $2.914 we are stuck in neutral territory."
With the market stuck in neutral territory, traders find opportunities few and far between. "The ability of this market to maintain value in the face of what appears to be some bearish weekend adjustments to the one- to two-week temperature views appears to be emanating from this week's unusually hot weather patterns," said Jim Ritterbusch of Ritterbusch and Associates in Tuesday morning comments to clients.
"This is forcing the market to price in a downside injection in next week's EIA release that could easily fall south of 50 Bcf. Meanwhile, this week's report is unlikely to force much surplus expansion as our expected 53 Bcf build would only be 5 Bcf above the five-year averages. With the next couple of EIA [reports] spurring negligible surplus expansion, the market has been able to exhibit only limited response to next week's anticipated cool-down across a broad portion of the nation that is now expected to extend through the first one-third of August.
"With the market still trapped in a narrow $2.65-3.00 range that extends back to early June, significant shifts in coal-to-gas substitution have been limited. And although demand for power generation has been stout, production has also been comparatively strong, with the supply side of the equation receiving an additional lift from availability of Canadian supply. Although supply surplus against average levels has been established this summer, we will reiterate that the overage is relatively modest and insufficient to force much of an upswing in short hedging activity. And with the surplus unlikely to stretch much until the middle of next month at the earliest per the EIA releases, supply-usage balances are apt to keep the market confined to this summer's price parameters in offering limited trading opportunities from either side."
Gas buyers under the New York ISO grid will have all hands on deck as New York City braces for its second heat wave of the season. "Another summer swelter is in store for New York City, with the second heat wave of the summer for many locations," said AccuWeather.com meteorologist Alex Sosnowski. "Temperatures reaching 90 degrees Fahrenheit or higher are in the offing from Tuesday through Thursday and perhaps on Friday as well. Many locations around New York City experienced the first official heat wave of the summer during the middle of July. Central Park fell just short, while LaGuardia, JFK and Newark airports hit 90 F for three days in a row spanning July 19-21.
"Less humid air will settle in on Friday, with slight cooling arriving in time for the weekend. Temperatures have averaged about 2 degrees Fahrenheit above normal during July and near normal during June at Central Park. Temperatures in some urban areas may struggle to dip below 80 F during the overnight hours."
In overnight Globex trading September crude oil rose 23 cents to $47.62/bbl and September RBOB gasoline fell a penny to $1.7579/gal.