December natural gas is set to open 19 cents lower Friday morning at $4.30 as traders jettison forecasts of cold next week in favor of estimates of near-term warming. Overnight oil markets surged higher.
Near-term temperature forecasts moderated overnight, although by next week cold is expected to re-emerge. "Arctic temperatures will gradually thaw over the Midwest and Northeast the next several days and will become warmer than normal by Sunday," said Natgasweather.com in its Friday morning forecast.
"A weather system tracking out of Texas Saturday will bring heavy rains and powerful thunderstorms, while a colder system will arrive over the north-central U.S. early next week with areas of rain and snow. There will be a much colder weather system late Thanksgiving Day that will bring a more intense blast of chilly northern Canadian air to the Midwest and Northeast, which will likely last through the holiday weekend."
Analysts surveying the trading landscape see a market vulnerable to the downside. "[Thursday's] wide price swings following a seemingly bullish storage figure attest to a variety and unusual volatility within the short-term temperature forecasts," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday to clients.
"Views have been rapidly changing, and clear trends much beyond a week or so have been of low confidence. In any event, consensus of ideas still favors a renewed bout of abnormally cold trends across a broad part of the Midwest within the six-10 day time window. And beyond next week, most forecasters are still favoring moderately below-normal trends well into the first week of December. While this would appear to keep the market well supported above the $4.30 area per January futures into next week, [Thursday's] trade reinforced our expectations that upside price follow-through to above last week's highs will prove limited.
"[Thursday's reported] 17 Bcf supply draw that was the first decline of the season was about 6 Bcf larger than average street expectations. Initial response pushed nearby values slightly above highs of this week and last but upside follow through was restricted to less than a couple of cents."
Expectations for next week's early (Wednesday) release of storage figures are starting to gel deep within the triple-digits. Ritterbusch contends that "supply is still approaching 3.6 Tcf even after last week's larger than expected decline. This deficit of only about 6.4% against last year will provide a cushion against extended cold spells, especially when combined with a near-record pace of production. These supply side factors will be forced to the front from the back burner once temperatures show some normalization."
In overnight Globex trading January crude oil added $1.46 to $77.31/bbl and January RBOB gasoline rose 4 cents to $2.0559/gal.