April natural gas is set to open 3 cents higher Thursday morning at $2.93 as overnight weather models call for near-term cooling and analysts study seasonal price patterns. Overnight oil markets dived once again.
Overnight weather models continued the recent trend toward cooler patterns. MDA Weather Services in its Thursday morning six- to 10-day outlook said, "Forecast trends were once again in the colder direction and focused in the eastern half. This comes with an increase in confidence with the positioning of a coastal low at the onset of the period and stronger model trends for high pressure that is left in its wake.
"On average, the period sees much below normal temperatures from the Mid-Atlantic to the Northeast while below normal readings span westward into the Midwest as well. The Midwest is coldest early on, but ‘aboves’ return to that region late. Warmer forecast changes are seen in the West, and the Southwest/Rockies favor ‘much aboves’ throughout the period."
Thursday's Energy Information Administration (EIA) storage report should give traders a real-time idea as to the balance of falling production, increasing exports, and demand. Recently weather factors have been dominating the trading landscape, and the five-year average withdrawal for this week’s report is a stout 136 Bcf, but estimates are coming in nowhere close to that figure.
Ritterbusch and Associates is looking for a 54 Bcf withdrawal. A Reuters survey of 18 traders and analysts showed an average 61 Bcf pull with a range of -51 Bcf to -77 Bcf. Last year featured an equally light withdrawal of just 63 Bcf.
April futures have been able to decisively trade higher following its test of $2.50 on Feb. 22 and technicians are mulling the possibility that a seasonal cycle low has been put in with an average advance off that low possibly taking the market as high as $3.45.
"The question is whether $2.52 is the seasonal cycle low," said Brian LaRose, an analyst at United ICAP, after the close Wednesday. "That is what we are trying to decipher, and to really further that case you need to get above $3.08. We are not at the point where we can say conclusively that we are at some sort of bottom here, but I was very impressed today that natural gas was up while all the other petroleum markets were down."
Tom Saal, vice president at FCStone Latin America in Miami, in his work with Market Profile expects the market Thursday to test Wednesday's value area at $2.931 to $2.909 before moving on and testing $2.853 to $2.833. Market profile is a breakout trading system and Saal places the weekly initial balance at $2.952 to $2.822. A move past the high end of the initial balance has a trading target of $3.017, and a drop past the low end of the initial balance is looking at a trading objective of $2.952, Saal said.
In overnight Globex trading April crude oil fell 90 cents to $49.38/bbl and April RBOB gasoline lost 3 cents to $1.6199/gal.