November natural gas is expected to open 8 cents higher Monday morning at $3.00 as forecasters see a building Alaskan ridge and cooling temperatures in the Midwest and Midcontinent. Overnight oil markets were mixed.
If analysts are correct October temperatures by the end of the month should be jockeying for historic lows relative to five-year averages. Demand should get a small lift.
"If October sets the course for winter demand, prepare for a winter that falls right in line with recent winters," said analyst Sadie Fulton of PointLogic Energy in a morning report.
"Lower 48 population-weighted temperatures have been slightly high relative to the proceeding years' Octobers, but not by much. Those temperatures are expected to slide to near five-year historic lows for the end of the month, and October 2017's power burn has followed a similar relative trajectory -- relatively high in the beginning of the month, coming down to give historic lows for the projected end of the month.
"Residential and commercial demand will remain low as long as historical Octobers go. October 2017 res/com has fought for the five-year historical low against October 2016 all month. The expected downturn in temperatures near the end of the month will give res/com a small boost -- lower 48 res/com demand may rise as much as 5 Bcf/d between Oct. 22 levels and the end of the month.”
That dovetails nicely with what meteorologists are saying.
"The big story this morning is the late six to 10 day into the early 11-15 day rolling forward cooler over the weekend thanks to stronger upstream high pressure ridging around the Alaska area, but sustainability continues to be suspect," said Matt Rogers, president of Commodity Weather Group in a Monday morning report to clients. "Our outlook this morning also features some modest midcontinent cooler changes in the short range with slightly warmer West Coast adjustments. The six to 10 day sees the biggest cooler changes in the middle third of the U.S. with a slightly warmer West Coast.”
Risk managers are eyeing the December and January contracts for a long market entry.
"Natural Gas continues to trade at lower levels, as we continue to see builds in storage this time of year," said Mike DeVooght, president of DEVO Capital Management. "We will be watching natural gas closely, looking for an increase in demand going into heating season, however we may have a few more weeks of lower prices before we get a demand increase.
"On a trading basis, we will be looking for a chance to get long if the December and January contracts trade below $3. Our target to establish producer hedges is the $3.50 for the winter strip," he said.
In overnight Globex trading the December crude oil contract rose 18 cents to $52.02/bbl and December RBOB gasoline fell fractionally to $1.6398/gal.