Despite higher weather-driven demand in the latest forecasts, natural gas futures were trading lower early Monday as above-normal temperatures are expected to start having a bearish impact deeper into the shoulder season. The October Nymex contract was down 2.4 cents to $2.510/MMBtu shortly after 8:40 a.m. ET.
Projected weather-driven demand increased over the weekend, according to Bespoke Weather Services. The forecaster pointed to additional cooling demand from hotter changes in the eastern half of the Lower 48 for this weekend into next week, as well as cooler changes in the western United States during the same time frame that should increase heating demand.
“Big picture, however, the theme remains the same,” with the pattern “dominated by above normal temperatures in the Midwest, East and South, enough to make it feel like summer for another week and a half in many areas,” Bespoke said. “The above normal temperature regime is still expected to persist beyond Day 15, and that is where it begins to tilt more to the bearish side,” as lower heating demand “will more easily begin to outweigh” above normal cooling demand.
Maxar’s Weather Desk said its latest six- to 10-day forecast Monday continued to show a “strongly amplified” pattern during the period.
This includes “cool anomalies in the West and warmth across the Eastern Half,” the forecaster said. “When compared to the previous outlook, the forecast is cooler from the Interior West toward the western Midwest, while warm adjustments now place the period with strong aboves in the eastern Midwest and at times in the Mid-Atlantic. Like in the nearer term, records will be challenged in the South in most days as much aboves hold steady in coverage.”
Further out in the 11-15 day period, Maxar observed cooler trends in its latest forecast for the eastern half of the nation.
“A round of below normal temperatures are now expected to accompany high pressure into the Midwest early and East at mid-period,” Maxar said. “Most of the Eastern Half still averages on the warm side of normal.”
Last week saw “the bubble burst” for natural gas, according to analysts at EBW Analytics Group. Demand started to ease, and “the short-squeeze cooled off,” leading the October contract to pull back after climbing as high as $2.710, they said.
“In electronic trading early this morning, natural gas is attempting to establish a new trading range, with the October contract trading as low as $2.493 -- the lowest it has traded since just after Labor Day,” according to the EBW analysts. Higher weather-driven demand in the outlook Monday suggests “support for the October contract is likely to hold near-term at $2.46 or above. Absent a major forecast shift during the 16-30 day window, however, the upside potential for the October contract may be limited.”
November crude oil futures were trading close to even early Monday, at around $58.06/bbl just after 8:40 a.m. ET. October RBOB gasoline was off about 1.4 cents to $1.6640/gal.