December natural gas is set to open a penny higher Wednesday morning at $2.72 as traders factor in expected cold in eastern markets later in the month. Overnight oil markets were mixed.
Analysts see a shift to cooler temperatures, especially in the East, by the end of the month. "Over the past three to four days, we have a seen some serious shifts in the weather outlook for the balance of the month," said EnergyGPS in a morning report to clients. "Since walking out the door last Friday (Nov. 11th) we have seen 42 HDDs added to the 15-day forecast compared to yesterday's morning weather run (Nov. 15th).
"The largest deltas have been in the East and Midwest regions of the United States...the driver of the increased HDDs [heating degree days] has been the six-10 day period as a cold front moves through the Midwest and the East." HDDs tell the tale, according to EnergyGPS.
"We can see the cooler weather move through the Midwest driving HDDs from 4 degrees below normal to above normal between the Nov. 18th and 19th. The East follows suit, shifting above normal on the 20th bringing the entire ConUS HDD forecast above normal. After the cold spell in the six-10, the East will stay above normal for the duration of the 11-15 day period while the Midwest joins the rest of the country back below normal. Diving into the East a little deeper, we can see that the East is forecast to rise above last year to end the month as well.
"We really can't understate the importance of the shift up in East HDDs we have seen since the end of last week. Most of the long-term models have pointed to the expectation of December coming in just above to inline with normals for the East and well above last year. However, this is the first time that the short-term models are confirming the outlook."
Tom Saal, vice president at FCStone Latin America in Miami, in his work with Market Profile said, "[Tuesday's] Neutral Day pattern suggests lower prices today." He expects the market to test Tuesday's value area at $2.817 to $2.759, and said to follow prices higher or lower depending on which way they break out of the week's initial balance. The initial balance is pegged at $2.822 to $2.704, and he looks for trading objectives higher at $2.881 and lower at $2.645.
In overnight Globex trading December crude oil fell 35 cents to $45.46/bbl and December RBOB gasoline gained fractionally to $1.3352/gal.