September natural gas is set to open 4 cents lower Wednesday morning at $3.84 as prices remain confined to a trading range and traders factor in weather reports showing a cooling pattern emerging later within the next 20 days. Overnight oil markets rose.
Analysts saw Tuesday's hefty 8 cent gain as holding within recent trading parameters and "supported by a somewhat warmer temperature forecast for next week. There is at least some chance that the tropical wave designated 96L could track through the Gulf of Mexico in seven-10 days, putting roughly 3.2 Bcf/d of offshore natural gas production at risk," said Tim Evans of Citi Futures Perspective.
Estimates of the week's likely dominant price driver, the Thursday Energy Information Administration storage report are "still in formation, but estimates we've seen so far closely bracket our own model's 82 Bcf figure, a build that would look bearish compared to the 48 Bcf five-year average for the week ended Aug. 15.
"Although not quite as bearish as the prior scenario, under this storage forecast we would still see a declining year-on-five-year average storage deficit that we view as consistent with an increasing downside risk, and a reduced upside potential for prices. This may not eliminate the chance for a seasonal rally to the extent that reduced upside potential might mean a winter peak of $5.00 instead of $6.00, although a declining deficit often does translate into falling prices over the intermediate term, much as it has since June," he said.
In the morning WeatherBELL 20-day outlook meteorologist Joe Bastardi sees a cooling pattern sliding into the Great Lakes and upper Midwest. "I am (as usual) riding the ECMWF [European model] for temperatures over the next 10-20 days, though I think there could be a bit more cooling into Texas later in the period for a time. However, instead of 'digging' into the Plains with a deeper trough, the trough with the cold air coming slides eastward through the Great Lakes later next week, so the cool comes and beats back the heat in the Midwest and mid-Mississippi Valley.
"However, I don't think it comes with the authority of the cooler air masses seen during most of this summer (we are talking from Oklahoma to Ohio as farther north it's quite cool). South of that area, Texas (for the most part) warms. Dallas is shrugging off the thunderstorm hangover from a few days ago."
Bottom line, WeatherBELL looks at cooling requirements of 152.2 cooling degree days (CDD) nationally over the next 15 days. Well below last year's 184.7 CDD but a touch above the 30-year average of 147.9 CDD.
The National Hurricane Center (NHC) in its 8 a.m. EDT report said it is following "disorganized shower and thunderstorm activity [that] is associated with an elongated area of low pressure located several hundred miles east of the southern Windward Islands. Gradual development of this system is possible during the next few days while it moves west-northwestward at 10 to 15 mph across the Lesser Antilles and into the Caribbean Sea." NHC placed the chance of tropical storm formation in the succeeding 48 hours at 30% and in the next five days at 50%.
In overnight Globex trading September crude oil added 67 cents to $95.15/bbl and September RBOB gasoline gained 2 cents to $2.7137/gal.