September natural gas is set to open a penny lower Tuesday morning at $3.93 as forecasters see near-term warmth as short-lived. Overnight oil markets gained.
Analysts attribute almost all of Monday's 10-cent gain to warmer weather forecasts but say the impact will be less going forward. "While above-normal temperature expectations through the first week of September are broad-based, deviations from normal don't appear sizable. Furthermore, the temperature factor will be losing pricing punch with the midweek rollover to the October contract as prompt futures," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday to clients.
"This market appears capable of maintaining [Monday's] gains and possibly making a run at the $4 mark during the next couple of sessions prior to some expected selling going into the weekly EIA storage report. We will be expecting an injection of 77 Bcf that would imply a further narrowing in the deficit against five-year average levels of almost 20 Bcf. Meanwhile, we feel that any additional price strength will be viewed as an opportunity by the money managers to push further into the short side of this market with the benefit of roll yield with premiums increasing sequentially out to the February futures that trade at about a 28-cent premium against September."
Analysts see Monday's cash market gains as having little staying power. "Prices ripped higher in the Northeast as a brief heatwave moves into the region, but the gains may last just a couple days," said industry consultant Genscape in a Tuesday morning report. "Accuweather's forecast highs for New York City get up to 90 degrees tomorrow, 9 degrees above normal, while Boston is forecast to hit 88 degrees, 10 degrees above normal. The heat has pushed today's nominated demand for Appalachia to a three-week high at 9,389 MMcf/d, and a five-week high in New England at 2,173 MMcf/d. As a result, Transco Z6 NY added $0.76 in Monday's trading to reach ($1.23), while AGT (Algonquin Gas Transmission) basis picked up $0.90 to reach ($0.73). The gains are likely to be short-lived, however, as temperatures from western Appalachia to eastern New England quickly return to normals by Thursday."
Forecaster WeatherBELL Analytics is expecting cooling requirements to be somewhat above normal. In a Tuesday morning 20-day Energy Outlook for the next two weeks, nationally it predicts cooling degree day (CDD) accumulations of 149.5, well below last year's 176.9 CDD but above the 30-year average of 136.6 CDD.
"At this time, it appears once again the lesson that the same drivers at one time of year lead to something different as the warm season starts its transition (remember last year's September cold rumors?) [and] is showing itself again," said Joe Bastardi, WeatherBELL meteorologist. "The kind of ENSO [El Nino Southern Oscillation] we have coming does not support eastern cool in September. That doesn't mean there cannot be cool days, but the ratio of cool to warm that we have seen in major CDD areas of the South and East may be opposite in September."
Hurricane Cristobal at 8 a.m. EDT Tuesday was about 590 miles southwest of Bermuda and was moving to the north at 12 mph. Maximum sustained winds were up to 75 mph, and NHC projected the storm to pass to the west of Bermuda and showed a path with little impact on the U.S. East Coast.
In overnight Globex trading October crude oil gained 40 cents to $93.75/bbl and October RBOB gasoline added a penny to $2.6082/gal.