September natural gas is called 2 cents higher Friday morning as near-term weather forecasts turn slightly warmer and analysts still see $3 in view. Overnight oil markets fell.
Overnight weather forecasts turned modestly warmer. "While no major changes are noted this morning, the general themes for [Friday] include slightly warmer to hotter East Coast conditions in the six-15 day range, some slightly cooler Midwest weather early in the 11-15 day, slightly cooler West Coast and about the same for the Deep South," said Matt Rogers, president of Commodity Weather Group.
"We have enough warmer changes earlier in the period to still eke out a slight demand gain to mark the fifth day in a row of increases. The biggest overnight shift was a more significant pullback in temperatures on the European ensemble, but it was not a major pattern change and basically just drifted closer to the model consensus mean..."
Tim Evans of Citi Futures Perspective said Thursday's outsized storage build 65 Bcf may be "casting some doubt over the prevailing trend in the underlying supply-demand balance. It's possible that there were some timing issues between the two periods that contributed to the volatility, as well as some related issues involving nuclear plant outages."
Evans said that although the data was a "bearish surprise, we note the year-on-year surplus that was as high as 753 Bcf back on June 5 declined to a new low of 521 Bcf as of Aug. 7. This suggests that while the data for last week was bearish relative to expectations and relative to the five-year result, it was at least less bearish than a year ago.
"We've been making a case for natural gas futures to move back above the $3.00 mark, and that's still a possibility in our view, although Thursday's storage report was a clear setback and the revised neutral storage forecast is more consistent with further volatile sideways chop."
Texas power buyers over the weekend will be able to offset purchases with some wind generation. Forecaster WSI Corp. in its Friday morning report said that ERCOT "will be seasonably hot and moderately humid with high temperatures in the mid 90s to low 100s. A southerly flow will cause humidity levels to creep up during Sunday into early next week. This will lead to partly cloudy skies along with the chance of isolated pop-up storms, mainly along the Gulf Coast. Temperatures will generally range in the 90s to near 100.
"An east-southeast breeze will support models and changeable wind generation during the next couple of days. Output is forecast to peak during the overnight hours upward of 4-5 GW, but drop off and become weak during the midday hours. The wind will gradually turn more southerly during the weekend into early next week, which should cause output to increase a bit. Peak output levels might range 6-8 GW."
In overnight Globex trading September crude oil fell 3 cents to $42.20/bbl and September RBOB gasoline shed 3 cents to $1.6823/gal.