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Much Cooler Temps On Tap; Expiring October Called 6 Cents Higher

The expiring October natural gas futures contract is set to open 6 cents higher Monday morning at $2.62 as overnight weather models changed to a cooler outlook. Overnight oil markets fell.

The first hint of cooler weather to come may have surfaced over the weekend as weather models call for cooler temperatures. MDA Weather Services in its Monday morning six- to 10-day outlook said, "The forecast trends considerably cooler versus expectations from Friday as ridging further strengthens over the northeast Pacific and into Alaska. While that large-scale feature could further cool this period, like shown in the American model, the remnants of what is currently a tropical depression in the western Atlantic will also lead to cooler temperatures with steady rains along the East Coast at the onset.

"Temperatures moderate in the East thereafter with more seasonal-like readings returning at mid-period. Similar levels of variability are seen in the Midwest as well, while the West is warm."

MDA said risks to the forecast include the American model may bring more widespread below-normal temperatures into the Midwest and South, and coastal New England could be slightly warmer based on model guidance.

If MDA forecasts are correct, the high in Chicago in one week will be 61 and the low 44. Philadelphia will see a high of 70 and a low of 55.

The change in the forecast hasn't changed at least one trader's perspective. "Overall, we remain bullish in the natural gas market, and for now continue to hold one long contract," said Harrison, NY-based Bespoke Weather Services. "We may add a second contract on price weakness through the day should guidance remain bullish, and we feel a test of $2.80 may be possible by the end of the week."

Mike DeVooght, president of DEVO Capital Management, in a weekend note to clients said he is not recommending any positions for trading accounts, producers or end users. "We continue to believe there is a good chance of a short-covering rally as we get into the heat season and continue to monitor the market for signs that we should enter into a long position. But we are not there yet."

In overnight Globex trading November crude oil fell 97 cents to $44.73/bbl and November RBOB gasoline added 3 cents to $1.3535/gal.

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