February natural gas futures continued to chase lower values Monday as near-term temperature forecasts call for a warm-up to hit the East by the end of the month. After putting in a low for the down move of $4.387 just prior to the regular session’s open, the prompt-month contract reached a high of $4.610 on the day before closing at $4.490, down 2.8 cents from Friday’s finish.
Citi Futures Perspective analyst Tim Evans said the natural gas market picked up where it left off on Friday, noting that the forecasted warming trend in both the six- to 10-day and 11- to 15-day forecasts imply weaker heating demand and weaker prices. “At some point, we do think natural gas will find a similar floor to the one in crude oil, where it will finally have reached a level where the selling pressure has been exhausted and recovery can begin, but as of this writing that level has yet to be established, with prices still able to weaken on bearish intermediate-term weather news,” he said.
Backing up the bearish weather indications, Frontier Weather in its six- to 10-day forecast covering Jan. 31 through Feb. 4 is calling for warmer-than-normal readings for most of the continental U.S. west of the Mississippi River, while below-normal readings will hover through Florida and along the southeast coast. The rest of the East is likely to see normal conditions. In the 11- to 15-day forecast covering Feb. 5 through Feb. 9, temperatures are expected to average near normal along the West Coast and above normal from the Rockies to the East Coast.
However, as always if you don’t subscribe to the forecasted temps, then choose a different forecaster and a different time frame. On Monday WSI Corp. said a vast majority of the country will be dominated by colder-than-normal temperatures during February, March and April (see related story).
MDA EarthSat in its six- to 10-day forecast calls for warmth to move eastward later in the period. “The coldest temperatures and highest heating demand across the East appears to be early in the period. Temperatures moderate late, with warmth spreading from the Rockies through the Plains at mid-period,” said meteorologist Matt Rogers. He noted that some warmth was expected to arrive in the East; however, at this juncture “this warmth appears to be temporary as another round of weak cold could move through towards days 9 and 10. Meanwhile, stronger warmth in the Plains is building into the end of the period, and is spreading east into the Mississippi Valley by day 10.”
Some market experts, who list the $32.40/bbl and $32.70/bbl lows for crude oil of the last several weeks as a double bottom, say natural gas futures could find some support from the neighboring commodity. Those that look for oil markets to provide price leadership for natural gas may be on the threshold of positive seasonal and technical factors. “We expect to see more volatility and uncertainty in oil markets from here, but we should not lose track of the importance of technical factors like last week’s double bottom in crude oil prices,” said Peter Beutel of Cameron Hanover, a Connecticut-based energy consulting firm. It was the one factor that “we may still be talking about (from last week) months from now. There is a strong seasonal tendency for refined products prices to advance from March to May, with bottoms often seen in January and February. We think we may have seen the lows, for now,” he said in a note to clients.
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