December natural gas was set to open flat to down Wednesday as the bulls continue searching for inspiration to break the market out of its long-standing trading range and build on an early-week rally. Overnight oil markets fell.
In the lead-up to Wednesday's open, the December contract was hovering in the 3.14-3.15 range, down a penny or so from Tuesday's settle.
Forecasters were pointing to some mixed changes in the weather outlook amid continued strong production.
"Weather guidance overnight marginally increased bearish risks in the medium-range and backed a bit off some of the long-range colder risks that were seen yesterday," Bespoke Weather Services said in its morning update. Despite a small increase overnight in gas-weighted degree days (GWDD) "we see weather as more of a stabilizing force than upward catalyst today, and given elevated production levels we see the market as at risk of a short-term pullback without more significant GWDD additions."
Monday's 15-cent surge seems to have run out of steam after hitting resistance in the 3.15-3.16 area.
"There's always a reaction when the first blast of cold hits the market, and I think Monday we saw a little bit of that," raising questions of sustainability, said Powerhouse’s David Thompson, executive vice president of the Washington, DC, risk management firm. "We came right back to an old high and old resistance and have not managed to punch through it. If we do, there'll be some technical buying come in."
In its latest six- to 10-day forecast, MDA Weather Services said the outlook "trends warmer versus previous expectations in the Rockies and Plains, with changes being minor from the Midwest to East. Overall, temperatures average near normal from the Midwest to the East, with colder leanings accompanying a round of high pressure into the Midwest on day six and along the East Coast on day seven.
"Following this high's passage, temperatures turn warmer across the Midcontinent and include above-normal readings from mid to late period in the Midwest and much aboves in Texas. Stormy conditions have the Northwest being near normal while the Southwest has aboves."
In overnight Globex trading December crude oil dropped 6 cents to $57.29/bbl, while December RBOB Gasoline fell fractionally to $1.8243/gal.