January natural gas is set to open 2 cents lower Monday morning at $3.39 as traders struggle to find signs of weather patterns capable of reigniting the earlier price advance. Overnight oil markets were mixed.
Overnight weather model runs did nothing to quell the trend of moderating temperatures in the more distant time frames. "[Monday's] 11-15 day period forecast is colder Plains, warmer East when compared to Friday's forecast," said WSI Corp. in its Monday morning report. "CONUS GWHDDs are down -3.8 to 137.2 for the period, [and] forecast confidence sits near average levels as models show fair agreement, though model spread is quite large, likely due to timing issues."
Risks to the forecast include cold "placed across the Northeast on days 13-15 pending a transient cold air mass passage. Temperatures could run warmer than forecast over the South-Southeast under a -PNA [Pacific North American]driven state," WSI said.
Tom Saal, vice president at FCStone Latin America LLC in Miami, in his work with Market Profile said to look for the market to test last week's value area at $3.566 to $3.472. Saal said the market "could test" $3.710 to $3.618 or $3.154 to $3.052, but he is "not sure what order."
Saal is an advocate of options to hedge winter price risk and volatility. It's a "no brainer" to go long options when the premium costs are less than the daily, weekly, monthly price fluctuations, he said.
The ongoing market tumble clearly has the bulls with their backs against the wall, and fundamentalists see further weakness ahead. Jim Ritterbusch of Ritterbusch and Associates sees the weather forecasts as "suggesting above-normal patterns across the eastern half of the U.S. that will sharply reduce withdrawals from storage beyond next week's EIA report. [Thursday's] release offered a supply draw that was about 20 Bcf larger than average industry expectations.
"The market's sharp selloff in the face of such a bullish [storage] report underscores a heavy pricing environment that has been accompanied by significant chart damage. From here, we see additional weakening that will carry January futures to about the $3.25 level, especially if weekend temperature updates suggest milder trends into the New Year," he said in a Friday report.
In overnight Globex trading January crude oil fell 22 cents to $51.68/bbl and January RBOB gasoline rose a penny to $1.5581/gal.