September natural gas is set to open 3 cents lower Monday morning at $3.75 as traders survey a weather landscape that is expected to feature the winding down of summer and minimal incursions of market-altering heat. Overnight oil markets tumbled.
Analyst Alan Lammey of WeatherBELL Analytics said, "Throughout last week, we repeatedly noted that if September gas prices closed below $3.84 for the weekly (Friday) close, then new lows may be on tap in the relative near term. It appears that the bearish side of that price pivot is now in play. At this juncture, unless there's some unforeseen bullish catalyst that emerges, it would not be out of the question to see prices test the mid-to-upper $3.60s in the relative near term.
"For the most part, the U.S. natural gas market is looking at the fact that the summer is winding down. Kids are going back to school; Labor Day is just a stone's throw away (Sept. 1st this year), and other than some heat building in Texas and along a portion of the East Coast as part of the six- to 10-day outlook, the latest 20-day forecasts published by chief meteorologist Joe Bastardi are depicting a rather lackluster demand scenario ahead. As a result, cooling demand will be subdued to a degree, setting the stage for another round of robust weekly storage data reports."
In a morning note to clients Tom Saal at INTL FC Stone said, "Prices [are] mov[ing] closer to long-term untested monthly profile value area [$3.710-3.462]...got close last month. This near-term weakness still provides seasonal buying opportunities for the upcoming winters."
Other forecasters also see continued slippage in energy requirements. Commodity Weather Group in its six- to 10-day outlook shows a ridge of below-normal temperatures extending from Wisconsin to Idaho to Colorado. Above-normal temperatures are seen in California and extending along an axis from East Texas to Kentucky to westernmost New York. "Changes were mixed [Monday] compared to last Friday's outlook, but the big picture view is that net demand was lost again," said Matt Rogers, president of the firm.
"Additional losses on the East Coast were probably the biggest drivers of today's change. The Midwest actually sees some warmer short-term changes with faster warming this week with some warmer values getting into the southern Midwest for the six-10 day. California also sees some hotter shifts early in the period and then again late in the six-10 day. Texas heat pulls back a bit this week with risks for thunderstorm activity disrupting highs.
"A major model split continues between the American/Canadian versus the European guidance for the Deep South, including Texas later six-10 day through the 11-15 day. We continue to lean toward the cooler American/Canadian versions, but the European would argue -- once again -- for hotter risks continuing. The 11-15 day focuses cool anomalies over the Midwest."
In overnight Globex trading September crude oil fell 90 cents to $96.45/bbl and September RBOB gasoline dropped two and a half cents to $2.6730/gal.