November natural gas is expected to open 4 cents lower Friday morning at $2.35 as traders see Thursday's decline contrary to a bullish storage report as further evidence of overall market weakness. Overnight oil markets were mixed.
In spite of Thursday's November futures drop to new 3-plus year lows, analysts see still further weakness for the December contract as well.
"[Thursday's] counter-intuitive downside response to what appeared to be a bullish storage figure fortified our bearish convictions of this market," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday. "We still advise accepting partial profits at our long targeted $2.35 level basis November futures. However, we suggest maintaining a core short position in the December contract as we maintain a downside target of $2.35 looking out over the next two- to four-week time frame."
For now, the temperature factor is maintaining a neutral-bearish appearance when extending a view out through the about the first week of November. Furthermore, attainment of the psychologically important 4 Tcf end of season supply level is possible with such a development only requiring an average weekly build of about 62 Bcf/week during the next three weeks.
Gas buyers for power generation across the MISO footprint over the weekend should have ample renewable energy supplies to work with. WSI Corp. in its Friday morning report said, "A storm system will move across the power pool during the next one to two days with a chance for rain and embedded storms, as well as blustery conditions. This will usher high pressure and seasonable conditions into much of the power pool during the end of the weekend into the start of next week, though a storm system will bring heavy rain into Entergy.
"High temps will dip into the mid 40s, 50s and 60s. The next potential frontal system and round of wet weather will likely slide into the north-central U.S. by Tuesday. A south-to-northwest wind associated with the frontal system will drive strong wind generation during the next two days. Output might top out as high as 7-9 GW. Wind gen will relax and become more variable during Sunday and Monday. The next potential storm system should drive up wind gen by Tuesday."
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 at $2.400 to $2.358 and "maybe" test a second value area at $2.493 to $2.473.
In overnight Globex trading December crude oil fell 4 cents to $45.34/bbl and December RBOB gasoline gained fractionally to $1.3072/gal.