March natural gas is set to open 6 cents lower Tuesday morning at $3.17 as overnight near-term weather models showed significantly warmer conditions in eastern energy markets. Overnight oil markets rose.
"Sizeable day-to-day changes were made to the six-10 day period forecast," said WSI Corp. in its Tuesday morning report. "The eastern two-thirds of the CONUS are much warmer than previous forecast, especially for days seven through nine. The West and adjacent portions of the central U.S. are much colder by days seven-10. The warmer changes offset the cold ones, so CONUS GWHDDs are down 9.6 to 121.5 for the period.
"The forecast has risks in either direction at this point given the inconsistency with the models the past few days and with inherent uncertainty with a storm system during the period, which could have a sharp contrast in temperatures. With that said, operational models offer a warmer risk over the East and a colder risk over the West and portions of the central U.S."
Analysts are beginning to question if there is any meaningful cold out to the end of February. "The sharp price selloff that is into its fourth day is being sustained overnight by continued comparatively mild temperature views that shifted significantly over the weekend," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients.
"These outlooks that are starting to stretch toward mid-February, are beginning to favor a renewed storage surplus situation that could remain intact through most of February. While non-weather factors continue to tilt bullish in accentuating weekly storage withdrawals, weather at this time of year tends to be the overriding driver of price and until another shot of arctic air moves down into the Midcontinent, this market could have difficulty piecing together a meaningful price advance."
Ritterbusch cautions that "temperature views can change quickly, and we feel that the next indication of a cold event could easily spike values back up to around this month's high of about $3.50-3.55."
In overnight Globex trading March crude oil gained 37 cents to $53.00/bbl and March RBOB gasoline rose 3 cents to $1.5640/gal.