March natural gas is set to open 3 cents higher Wednesday morning at $2.59 as traders reconcile a modest loss in heating demand with deeply oversold market conditions. Overnight oil markets fell.
Overnight weather models showed a small loss in heating load. MDA Weather Services in its morning six- to 10-day outlook said, "The forecast trends warmer along the northern tier and in the West while the South is mixed, with this lending a small loss in national GWHDDs when compared to yesterday's outlook.
"The period averages with much above normal temperatures across the South, the southern Midwest and in the East, with strong ‘above’ peaks coming out ahead of low pressure on day seven in the Midwest and at mid-period along the East Coast. In an amplified pattern setup, troughing looks to continue providing a coverage of below normal temperatures in the West, where models are mixed on the cold's intensity.
"Still warmer risks exist along the East Coast around mid-period and based on an increase in westerly flow ahead of low pressure. Risks remain mixed in the West."
With March's 27-cent nosedive Tuesday, Tim Evans of Citi Futures Perspective saw the market "plumbing the lowest level for a nearby futures contract since November as the temperature forecast for the next two weeks trended warmer, further undercutting expected heating demand."
The ongoing mild temperature forecasts have prompted estimates of decreased heating load in major market zones. The National Weather Service (NWS) for the week ending Feb. 25 has predicted triple-digit variances from normal for the East and Midwest. New England is expected to see 154 heating degree days (HDD), or 100 fewer than normal, and the Mid-Atlantic is anticipated to have 118 HDDs or 117 fewer than its norm. The greater Midwest from Ohio to Wisconsin is forecast to have 105 HDDs, or 145 fewer than normal.
The year-ago storage report corresponding with this week’s showed that 131 Bcf was withdrawn, and the five-year average decline is 158 Bcf. This week’s report is expected to come in at about half the five-year pace. The Desk Early View Survey of 11 traders and analysts showed an average 84 Bcf withdrawal with a range of -75 Bcf to -91 Bcf.
In overnight Globex trading April crude oil fell 36 cents to $53.97/bbl and April RBOB gasoline fell fractionally to $1.7201/gal.