October natural gas is set to open unchanged Tuesday morning at $3.14 as traders digest Monday's gains and look for a spot to sell. Overnight oil markets advanced.
Forecasters are calling for increased warmth near term. "In the past 24 hours, the American and European ensemble have both gained a small handful of cooling degree days to boost the overall demand estimate further for the final part of September ahead," said Matt Rogers, president of Commodity Weather Group in a morning report to clients.
"Moderate humidity combines with highs mostly in the 80s to offer enhanced late-season cooling demand for most of the Midwest and East with 90s more frequently across the South. Most of the warmer changes seem to be in the one to 10 day range with the 11-15 day edging slightly cooler faster for the East Coast and then back warmer for the West again.
Traders are letting the market run higher for now, but are looking for a spot to go short. "Although these hot temps are expected to be followed by moderation later next week, the temperature factor appeared sufficient to spur a large amount of fund short covering after the speculative entities had been pushing aggressively into the short side of the market in recent weeks," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients. "Although our high side parameter at the $3.14 level was violated, we are remaining on the sidelines for now as we still have difficulty building a case for sustainable price gains.
"But at the same time, we are conceding to the fact that the supply surplus has diminished this year and that some expected expansion per Thursday's” Energy Information Administration storage report “won't significantly alter the gas balances. While the upcoming hot temps could potentially cut the surplus in half, slightly above average supplies likely won't be enough to support values for long unless accompanied by a significant supply disruption. While a string of hurricanes in the Atlantic could threaten Gulf of Mexico production alleys, offsets in the form of cooling effects could also be seen. All in all, we are looking for a place to short this market for a trading turn on first indication of a shift in the temperature views."
Tom Saal, vice president at FCStone Latin America in Miami in his work with Market Profile expects the market to test Monday's value area at $3.142 to $3.114. "Then" it should test $3.101 to $3.061 followed by a test of $3.028 to $3.012. "Eventually" it should test $2.948 to$2.932.
In overnight Globex trading October crude oil rose 42 cents to $50.33/bbl and October RBOB gasoline gained fractionally to $1.6689/gal.