October natural gas is expected to open 5 cents lower Friday morning at $2.68 as traders reconsider their bullish exuberance in the face of a plump storage build and look to establish a long position at lower levels. Overnight oil markets eased.
Jim Ritterbusch of Ritterbusch and Associates said Friday's weak open "should not come as a surprise since we saw nothing particularly bullish about yesterday's EIA [Energy Information Administration] report and short-term temperature outlooks that now stretch out to about Sept. 18th are favoring a broad-based cool-down that is expected to cover a major portion of the nation's Midcontinent.
"Since we see no items on the horizon capable of forcing a sustainable price advance, we are abandoning a short-term bullish trading posture for now as we will look for a price decline to lower levels to re-establish a long holding. With no help from the temperature factor or storm events amidst a sizable expansion in the supply surplus, it now appears that the next 15-20 cent price swing is more apt to develop on the downside rather than the upside."
Gas buyers pondering weekend power loads may find a healthy dose of renewable energy at their disposal. WSI Corp. in its Friday morning forecast said the MISO power pool should experience "a variable southerly wind will lead to changeable, but elevated wind generation [Friday] into the weekend. Wind gen will likely trend upward ahead of the front with output as high as 5-7 GW during the overnight hours. A westerly breeze behind the cold front could continue to support modest, albeit decreasing wind gen early next week.
"A broad upper-level ridge will encompass the north-central U.S. during the next one to two days. This will result in partly sunny skies along with anomalous late summer heat and moderate humidity, though there is a chance of showers and storms over the upper Midwest and Great Lakes. Highs will range in the 80s to mid 90s along with lows in the 60s to low 70s."
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile said to look for the market to test Thursday's value area between $2.734 and $2.668. He added that the week's Market Profile pattern is a neutral week, which "shows indecision about market direction. Sideways continues for now." The Cal '16 strip is "very oversold. Buyers be ready," he said in a Friday morning note to clients.
In overnight Globex trading October crude oil fell 3 cents to $46.72/bbl and October RBOB gasoline dropped a penny to $1.4299/gal.