December natural gas is set to open 4 cents lower Monday morning at $2.33 as traders ignore any seasonal cooling tendencies and concentrate on weather forecasts still, on balance, void of any pervasive cold. Overnight oil markets rose.
Weather forecasters are calling for a cooler South but warm Midwest. In a Monday morning report, MDA Weather Services said “The [six- to 10-day] forecast comes in significantly colder than in Friday’s report in the South and East, where this period now features temperatures that are now closer to seasonal norms overall. The early part of the period will be coldest, with high pressure bringing temperatures to below-normal levels across the South.
“This adjustment comes with increased variability in the large-scale pattern as ridging builds farther northward into Greenland. Despite these changes, continued troughing over Alaska limits any extreme or sustained cold, with the Midwest remaining unseasonably warm in this period. The Midwest could also be additionally warmer based on the European models. The American model [could be] colder than forecast in the South and Mid-Atlantic.”
Risk managers are building a long January position. In a weekend note to clients, Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm, said, “We started to buy the January contract at $2.50 (light position).
“Natural gas has sold off sharply because of moderate summer temperatures and the anticipation of a warmer than normal Winter because of the current El Nino. The weekly storage numbers [52 Bcf] were considered friendly when the injection came in less than expectations.
“As we look forward to the heat season, which can often be supportive to the gas market, demand expectations have been ratcheted lower because of the El Nino, [but] on a trade basis, we have been looking for an opportunity to get long the natural gas market.”
DeVooght currently advises trading accounts and end-users to hold a long January position at $2.50, Producers are counseled to stand aside.
In overnight Globex trading December crude oil added 42 cents to $44.71/bbl and December RBOB gasoline gained 2 cents to $1.3896/gal.
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