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Buy Target In Sight; November Called 9 Cents Lower

November natural gas is expected to open 9 cents lower Monday morning at $2.20 as traders factor in another warmer revision to near-term temperature forecasts. Overnight oil markets were mixed.

Overnight weather forecasts turned sharply warmer over key energy markets. WSI Corp. in its Monday morning outlook said, "[Monday's] six-10 day period forecast calls for the expansion of above-average warmth and is notably warmer than Friday's forecast over a good portion of the central and eastern U.S. The western U.S. is much cooler. As a result, GWHDDs plummeted 13.8 to 48 for the CONUS. Forecast confidence has improved since last week and can be considered a little above average for a change.

"Medium-range models are in good agreement with the evolution and progression of the pattern, which is aided by a lack of tropical activity. There is a slight downside risk across the majority of the West and even the northern Plains by the end of the period. The southern U.S. might run even warmer."

Risk managers have their buy objective in focus. "Natural gas closed the week sharply lower and at levels not seen since 2012. Natural gas continues to be pressured by moderate temperatures, mediocre demand and more than adequate supplies," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm, in a weekend report to clients. "Also putting pressure on the gas market has been aggressive hedge selling in the deferred contracts as they started to break the $3.00 level.

"As we look forward to the heat[ing] season, which can often be supportive to the gas market, demand expectations have been ratcheted lower because of the El Nino, [and] on a trade basis, we have been looking for an opportunity to get long the natural gas market, but have not felt like we have yet reached the bottom of this move. We would start to be a light buyer if January reaches the $2.50 level."

January futures settled Friday at $2.632.

In overnight Globex trading December crude oil fell a penny to $44.59/bbl and December RBOB gasoline gained fractionally to $1.3000/gal.

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