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Trading Still Rangebound, Choppy; June Called 6 Cents Lower

June natural gas is expected to open 6 cents lower Monday morning at $3.21 as weather forecasts offer little in the way of substantive change and risk managers look for a spot to initiate short hedges. Overnight oil markets were narrowly mixed.

Weather models see a cool East and West Coast and an above-average Midcontinent. "The forecast trends warmer from Sunday's report in the Midwest and parts of the East, while any cooler adjustments are limited to a few locales in the West," said MDA Weather Services in its morning six- to 10-day report to clients. Overall, this period continues to feature a coverage of below-normal temperatures in the East, but with moderating trends as the coolest readings take focus in the early half when low pressure tracks near the coast.

"By late period, increased storminess in the Midcontinent out ahead of a deepened western trough will have temperatures warming closer to seasonal norms in the East while aboves return to the Midwest at that time. Still cooler risks are seen along the West Coast per model consensus, and the Euro Op is faster to warm the East, but both the Euro and GFS [Global Forecast System] ensembles are slower in this regard, a mixed risk there."

Risk managers are looking for a spot to sell.

"The gas market continues to trade in a choppy two-sided range as market participants bide their time awaiting the cooling season demand," said Mike DeVooght, president of DEVO Capital, in a weekly report to clients. "The weekly gas storage numbers [+67 Bcf] came in slightly higher than anticipated.

"On a trading basis, we still continue to look for the market to run out of steam at current levels. We think there is a good chance that we could test the lows of late February in the next few months. We will hold current short positions for producers and will look at rallies to the $3.40-3.50 range for the balance of the year as a selling opportunity."

The early read on the week's storage report found The Desk in its Early View survey with an average 53 Bcf injection, below last year and the five-year average. Last year 58 Bcf was injected and the five-year pace stands at 73 Bcf. The average was from a sample of 12 traders and analysts and the range on the survey was 48 to 61 Bcf.

In overnight Globex trading June crude oil fell a penny to $46.21/bbl and June RBOB gasoline rose a penny to $1.5137/gal.

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