August natural gas is expected to open 4 cents higher Wednesday morning at $3.81 in spite of a tweak cooler to longer-term forecasts. Overnight oil markets were narrowly mixed.
Tim Evans of Citi Futures Perspective said the small contango between the August and September contracts of just 1.3 cents “is a reminder that for all the above-average storage injections and decline in price over the past few weeks, the market also remains tighter physically than in recent years.”
Evans estimates a build of 104 Bcf in Thursday’s gas storage report and suggests that there may be something of a “bearish surprise” inasmuch as most estimates seem to be coming in in the 96-100 Bcf range. Kyle Cooper of IAF Advisors is looking for a build of 93 Bcf.
MDA Weather Services in its morning 11- to 15-day forecast said, “Below-normal readings remain favored to linger over the South-Central U.S., with this region into the Southeast shifting cooler in [Wednesday’s] outlook. This further southward dig of cool air comes as ridging remains strong across the higher latitudes, with the northern tier of the nation shifting a touch warmer today. Model agreement remains fairly strong with the broad ideas, and as a result confidence holds steady from yesterday. Confidence is lowest in the East where there is a bit more uncertainty with regard to how fast cool air breaks down.”
Tom Saal in his work with Market Profile said determination of weekly “break out/down targets present potential trading targets to assist in your hedge trading decisions. The “Monday/Tuesday” rule is simply the expected pricing target(s) when the range of the “day” trading sessions combined from Monday and Tuesday are exceeded.” Saal cited one of the main advantages of using the methodology is that it is objective. “No subjective emotions/opinions/excuses to get in the way of making a decision.”
Saal expects the market to test Tuesday’s value area at $3.834 to $3.798 and from there he advises clients to go with the weekly breakout targets from an initial balance of $3.892 to $3.768. He cites breakout targets at $3.954 and $4.016 and breakdown objectives at $3.706 and $3.644. From there he is looking for a test of a second value area at $3.965 to $3.942.
“The back years, Cal’15, Cal’17 and Cal’19, remain extremely oversold. Buyers be ready…think objectivity,” he said in a morning note to clients.
In overnight Globex trading September crude oil was up a nickel at $102.44/bbl and September RBOB gasoline fell fractionally to $2.8506/gal.
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