September natural gas is expected to open 4 cents lower Friday morning as traders anticipate a weather-driven price decline. Overnight oil markets fell.
Near-term weather models turned warmer overnight. WSI Corp.in its Friday morning outlook said, "The latest six-10 day period forecast has trended warmer than yesterday's forecast over a good portion of the West into the northern Plains. Otherwise, much of the central and eastern U.S. is cooler. PWCDD are down 2.9 to 43.9 for the CONUS.
"Confidence in the forecast has improved and is average at best today. Medium-range models are in better agreement with recurving typhoons and the resulting pattern, but there are still technical issues and residual uncertainty. The risk is to the warmer side across the Southwest, Rockies, Plains and the Midwest. The South and the northwestern U.S. have a risk to the cooler side."
Analysts see price weakness in spite of Thursday's supportive inventory figures. "[Thursday's] approximate 3-cent advance off of what appeared to be a bullish storage figure combined with some need to inject some storm premium related to Hurricane Danny would appear to suggest little upside price follow-through from here," said Jim Ritterbusch of Ritterbusch and Associates.
"The 53 Bcf storage build fell short of our expectation by 10 Bcf in stretching the supply surplus against five-year averages to a smaller than anticipated 80 Bcf. However, we still expect a surplus of more than 100 Bcf by month's end based on this week's cool-down and temperature ideas through the balance of August that are not currently advising any major deviations from normal. For now, a price decline in October futures down into the $2.65-2.70 zone remains as a strong possibility that may require some assistance from weekend updates favoring a renewed cool down into the Labor Day holiday."
The National Hurricane Center in its 5 a.m. EDT report said Hurricane Danny was up to 85 mph winds and was about 985 miles east of the Leeward Islands. It was moving to the west-northwest at 10 mph.
"Some additional strengthening is possible [Friday], but Danny should begin to weaken on Saturday. Danny is a tiny hurricane. Hurricane-force winds extend outward up to 10 miles (20 km) from the center and tropical storm force winds extend outward up to 60 miles (95 km)," NHC said.
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile said Friday in a note to clients, "One of the best features of Market Profile is the horizontal dimension of displaying participating trader behavior." In discussing a profile of the September contract, he noted that the profile "shows lots of trades taking place in the $2.800 area (aka Mode) which can act like a magnet. Note the indentation (lack of trades) at the $2.750 area and the market's attempt to 'fill in' that area."
In overnight Globex trading, October crude oil fell 50 cents to $40.82/bbl and October RBOB gasoline shed 3 cents to $1.3624/gal.