April natural gas was set to open Monday about a penny lower at around $2.587 despite weather guidance continuing to show colder than normal conditions sticking around through the first part of next month.
NatGasWeather.com noted “only slight changes” in guidance over the weekend, with the data “still favoring the first week of April to be colder than normal across much of the northern half of the country for stronger than normal national demand. The data is struggling on whether cold air will retreat into Canada the second week of April but does favor at least some colder air holding, which could be interpreted by markets as colder trending.”
But supportive weather trends recently have failed to drive much upward movement in natural gas prices, the firm noted.
“Early week trading should be telling as to whether the markets finally see the pattern as cold enough to warrant higher prices since the weekend didn’t back off on cold prospects across the northern U.S. in early April,” NatGasWeather said, noting that the markets could still open lower on fundamental factors, including near-record Lower 48 production.
Bespoke Weather Services said the weekend data showed “very impressive colder trends centered on April 3-4, with a branch of the polar vortex being perturbed much closer to northern parts of the country. The result is an expectation that a couple days of heating demand may approach seasonal records, and though we are not yet forecasting it the amount of cold produced will rival what is much more typical of early to mid March instead of early April.
“...Natural gas prices sold off Sunday evening and overnight only to gradually recover this morning on more supportive weather guidance,” the firm said. “...While production concerns and less tight” storage data “do limit upside, weather forecasts have turned so supportive that they should have an influence this week, and once the April contract is off the board we may see the summer strip rally more as well.”
The April contract is set to expire this week, with most of the trading volume already shifting to May, which was trading near even at around $2.631 prior to the open Monday.
“With expiration upon us our attention turns to the May contract,” ICAP Technical Analysis analyst Brian LaRose said. “In terms of May, our focus will be on the $2.614-2.600 vicinity to start the week. If May can hold this band of support there is still a chance for another period of sideways to higher price action near term.
“Fail to find support and a drop to $2.480-2.455, even $2.189-2.121 would be indicated. It is bottom or else for the bulls.”
May crude oil was set to open about 9 cents lower at around $65.79/bbl, while April RBOB gasoline was down fractionally at around $2.0329/gal.