November natural gas is set to open 5 cents higher Wednesday morning at $4.17 as traders mull the magnitude and duration of expected cold events and technicians note the attempt to break a key resistance level. Overnight oil markets rose as well.
Natgasweather.com in its morning report expects periodic surges of cooler air especially at more northern latitudes. "With a cooler northern US pattern beginning to take shape, stronger heating demand should be expected over the coming weeks, especially for the Midwest into New England. There should be three distinct cool blasts to play out over the next 10 days, with each one getting slightly colder. They aren’t exceptionally cold, but should still be enough to keep the markets on edge as the pattern is playing out eerily similar to what occurred last winter.
"The only difference is the immediately eastern U.S. coastline will remain ahead of each cool blast for a period of time, allowing warm southerly winds to surge in. What’s important is a relentless barrage of cooler than normal Canadian weather systems should push fairly deep into the central and eastern US over the next two to three weeks and this should drive stronger than normal early season heating demand. In addition, California and portions of Texas, will remain quite warm and require some moderate cooling demand, leading to shrinking weekly builds following the next two."
For the moment those expecting mild temperatures and a lack of any weather-driven impact are secure. The National Weather Service forecasts much below normal heating degree days (HDD) for the week ended Oct. 4. New England is expected to see just 31 HDD or a stout 31 below normal and the Mid-Atlantic should only have to endure 13 HDD or 41 less than its normal tally. The greater Midwest from Ohio to Wisconsin is expected to experience 25 HDD or 32 below its seasonal norm.
Natgasweather.com is circumspect on the market. "We quite honestly don’t have a good feel for prices here as they’ve gained more than 30 cents over the past week and could warrant some profit taking. However, weather patterns look to remain at least moderately bullish through October 14, potentially longer, especially if cooler temperatures have any success pushing into high population Northeast cities, and this could be reason enough to continue to drive prices higher. In addition, today will likely bring some positioning going into tomorrow’s EIA weekly report, which is expected to bring in another much larger than normal build with estimates around 105-109 Bcf."
Tom Saal in his work with Market Profile calls for the market to test Tuesday's value area at $4.146 to $4.116 before moving on and testing $4.013 to $3.983. "Eventually" he says the market will test $4.252 to $4.228. He pegs the weeks initial balance at $4.178 to $4.050 and Market Profile methodology suggests that once prices break out of that range, they will strive to make higher/lower price objectives.
In overnight Globex trading November crude oil gained 51 cents to $91.67/bbl and November RBOB gasoline added a cent and a half to $2.4526/gallon.