September natural gas is set to open 4 cents higher Tuesday morning at $3 as traders see an improved technical picture and attempt to rationalize unsupportive weather. Overnight oil markets were narrowly mixed.
In spite of Monday's 7 cent advance, traders are cautious. "Although [Monday's] price gains were difficult to rationalize from a pure fundamental perspective given limited adjustments in the short term temperature views, we are conceding to an improved chart picture that is developing as nearby futures push up to highest levels in more than a week," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients.
"A test of our expected $3 resistance would appear likely today until Thursday's [Energy Information Administration] storage report offers further guidance. We remain reluctant to suggest a strong trading stance from either direction given unfavorable risk/reward ratios. But we feel that the market's ability to advance by as much as 5% off of last Thursday's lows is favoring some additional price strength that could accelerate on a close above the $3 mark. But while we still see a test of this month's highs of $3.11 as high probability, we can easily construct a case for an eventual move back down to about the $2.85 level."
Weather models overnight turned more moderate. "The end of the summer cooling season continues to fade faster than normal with another round of slightly cooler changes today for the Midwest to East through especially the front 10 days of the forecast period," said Matt Rogers, president of Commodity Weather Group. "Cooler changes on this morning's forecast were strongest though in the South with rains from Harvey potentially seriously dampening Texas, while cooler changes for the state seemed a bit stronger for the 11-15 day too. The West is mainly flat to hotter for the one to 15 day range.”
In its 8 a.m. report the National Hurricane Center (NHC) said what is left of Harvey is grinding across the Yucatan. "Disorganized showers and thunderstorms over the Yucatan Peninsula and adjacent water areas are associated with the remnants of Harvey. Environmental conditions are expected to be conducive for development when the system moves over the Bay of Campeche tonight, and a tropical depression is expected to form over the southwestern Gulf of Mexico on Wednesday or Thursday." NHC pegged the likelihood of a Harvey reformation into a tropical storm in the next five days at 90%.
NHC also reported on shower and thunderstorm activity associated with a broad trough of low pressure near the northwestern Bahamas remaining limited. "Any development of this system during the next few days should be slow to occur while it moves west-northwestward, and then turns northwestward or northward near Florida and the adjacent waters." NHC placed the probability of tropical storm formation in the next 5 days at 30%.
In overnight Globex trading the expiring September crude oil fell 5 cents to $47.32/bbl and September RBOB gasoline gained fractionally to $1.5874/gal.