Natural Gas Bulls Hold Their Ground Early Despite 'Very Warm' Temperature Outlook - Natural Gas Intelligence

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Natural gas futures held steady in early trading Monday, avoiding further losses despite continued signs of warmth from the latest weather data. The December Nymex contract was up 0.4 cents to $2.892/MMBtu at around 8:45 a.m. ET.

The “very warm” temperature outlook that dominated guidance last week held in model runs through the weekend, and now mild temperatures figure to last into the latter portion of November, according to Bespoke Weather Services.

“While we did add a little nearer-term demand to our forecast, we had already been positioned warmer than the model output,” as both the American and European datasets came in “flat to slightly lower” in terms of overall forecast gas-weighted degree days (GWDD), the firm said.

The most recent days added to the back end of the 15-day outlook were “quite warm” and could help put this month on track to become the third warmest November on record as measured by GWDD, Bespoke said.

“There is still a chance it could move to number one” under the current combination of a positive Eastern Pacific Oscillation and a lack of Atlantic blocking, according to the firm.

The December contract moved decisively lower last week on mild temperatures setting up in the forecast, but analysts at EBW Analytics Group described an “underlying story” for the market that is “more complex” than the recent price action might indicate.

“While exceptionally warm weather caused prices to collapse last week, demand is likely to rebound sharply this week as temperatures move back closer to normal, seasonal norms increase” and as liquefied natural gas feed gas flows “surge,” the EBW analysts said. “With production also weakening, the supply/demand balance at Henry Hub is likely to tighten significantly, triggering a rebound in cash prices.”

Futures could continue to slide should the weather outlook continue to trend warmer. However, for now “futures show signs of stabilizing, with the potential to move higher when the end of the warm spell is in sight,” according to the EBW analysts.

Looking at the technicals, coming off of last week’s heavy selling, natural gas bulls will need to turn things around quickly, according to ICAP Technical Analysis analyst Brian LaRose.

To prevent further declines bulls will need to “immediately turn things around to start the week,” LaRose said. “If they can not, we will have a green light to take aim at lower levels. Will be gunning for the $2.680-2.646-2.615 vicinity in this situation.”

Meanwhile, Tropical Storm Eta was causing “gusty winds and heavy rains” over parts of South Florida and the Florida Keys as of 8 a.m. ET, according to the National Hurricane Center (NHC). The storm was moving west at 13 mph and carrying maximum sustained wind speeds of 65 mph.

“A westward motion will continue with some reduction in forward speed this afternoon and tonight,” the NHC said. “Little overall motion is forecast on Tuesday, and a slow northward motion is expected on Wednesday. On the forecast track, the center of Eta will gradually move away from the Florida Keys and South Florida today, and will remain over the southeastern Gulf of Mexico tonight through Wednesday.”

December crude oil futures were up $3.70 to $40.84/bbl at around 8:45 a.m. ET, while December RBOB gasoline was up about 9.1 cents to $1.1758/gal.

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Natural Gas Bulls Hold Their Ground Early Despite 'Very Warm' Temperature Outlook - Natural Gas Intelligence
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