January natural gas is set to open 12 cents lower Monday morning at $1.87 as weather models over the weekend turned much more moderate. Overnight oil markets plunged as well. Equity markets, in turn, are expected lower.
Both near-term and longer-term weather forecasts turned sharply warmer over the weekend. "[Monday's] 11-15 day period forecast is several degrees warmer across the board, resulting in a -17.7 GWHDD loss for the CONUS when compared to Friday's forecast," said WSI Corp. in its Monday morning report. "Total CONUS GWHDDs are now forecast to be 92 for the period.
"Forecast confidence is above average for the period due to good agreement between the models. Temperatures could run less anomalously warm over the East late in the period depending on short-wave/cut-off low pressure system progression."
Risk managers are standing aside the market for right now. Mike DeVooght of DEVO Capital Management in a weekly report to clients said, "The short-term weather outlook is calling for moderate temperatures throughout much of the United Sates. Weak demand, along with record production may push natural gas prices even lower. Fundamentally, the market is very well supplied and until the need for natural gas increases, this trend could continue. On a trading basis, we will stand aside."
DeVooght recommends that trading accounts, end-users and physical market longs await further developments before entering the market.
Tom Saal, vice president at FC Stone Latin America LLC in Miami, in his work with Market Profile said he expects the market to test last week's value area at $2.106 to $2.026. Also on Saal's radar are value areas at $2.222 to $2.152, $2.337 to $2.264, and $2.557 to $2.465.
In overnight Globex trading January crude oil fell 92 cents to $34.70/bbl and January RBOB gasoline fell 5 cents to $1.2297/gal.