September natural gas is set to open 5 cents lower Monday morning at $2.75 as weather forecasts turn cooler and a tropical event surfaces in the Atlantic. Overnight oil markets fell.
Overnight weather models call for cooler temperatures. Commodity Weather Group in its Monday morning report said, "A surge of cooling this week into the Midwest and Deep South is performing stronger than expected. We still have some moderate to strong East Coast heat the next few days with low-middle 90s in the Mid-Atlantic before cooler changes later this week. Another quick round of cooling is seen in the six-10 day to keep Midwest temperatures cooler.
"Then some modest heat returns to the South, Midwest and East by the 11-15 day, but confidence is very low. Models are mostly cool overnight, [and] lost additional demand overnight to compound changes from Friday, but massive differences continue between them," said Matt Rogers, president of the firm.
Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm, in a weekend note to clients said, "The tight two-sided trade over the past couple of months can be attributed to short-covering and the uncertainty of what the impact of falling gas rig activity will have on future natural gas production. Demand is moderate and supplies continue to be adequate. If the gas market does start to rally, we could see a quick rebound to the mid to high $3 level."
At present, DeVooght recommends that trading accounts, end-users and producers stand aside the market.
The National Hurricane Center (NHC) is following a tropical disturbance in the far eastern Atlantic. In its 8 a.m. EDT report NHC said, "Shower activity associated with an area of low pressure located several hundred miles southwest of the Cape Verde Islands continues to show signs of organization.
"Environmental conditions appear conducive for development during the next few days, and a tropical depression will likely form by the middle of the week while the system moves westward or west-northwestward near 15 mph." NHC estimated a 50% chance of tropical storm formation in the succeeding 48 hours, and a 70% chance in the succeeding five days.
In overnight Globex trading September crude oil lost 74 cents to $41.76/bbl and September RBOB gasoline fell 2 cents to $1.6707/gal.