December natural gas is set to open 2 cents higher Friday morning at $2.38 as traders go back to their spreadsheets and ratchet down season-ending inventory expectations. Overnight oil markets were mixed.
Traders are looking for the market to hold recent gains but are anticipating an opportunity to go short about another 15 cents higher. "Although this market has swung on both sides of yesterday's close overnight, we are expecting a steady-strong finish to this week's trade as it would appear that some structural shifts are developing in downsizing recent weekly storage injections," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients.
"[Thursday's] 52 Bcf injection was much below industry ideas, especially ours, in furthering a string of several downside misses that are helping to offset the impact of mild fall conditions. While the storage increase that was less than the five-year average hike of 58 Bcf takes a 4.1 Tcf supply peak off of the table, a record supply north of 4 Tcf is still a near certainty given yesterday's lift to the 3.929 Bcf level."
Ritterbusch believes that "yesterday's strong price advance of almost 4.5% will prove sustainable going forward but in erratic fashion as the market responds to daily updates to the short term temperature views. For now, above-normal temperature outlooks, especially across the upper Midwest, are still favoring unseasonably mild conditions with some outlooks beginning to stretch through the third week of this month.
"We are maintaining our expectation for an advance in nearby futures up into the $2.45-2.50 zone where we will look to re-establish short holdings in anticipation of a return to this month's lows of about $2.18 that were established a week ago."
Gas buyers across the PJM footprint looking for supplies to fuel gas generation will have some renewable generation over the weekend to work with. WSI Corp. in its Friday morning report said, "A storm system and its associated cold front will push across the power pool [Friday] with a round of showers and perhaps a few thunderstorms. It will be windy and mild along with a touch of humidity. Highs will range in the 60s and 70s, warmest east.
"A gusty southwest-to-northwest wind associated with the storm system will drive strong wind generation today. Output will peak as high as 5 GW. Wind gen will likely subside and become light during the weekend into the start of next week."
Thursday's hefty storage build of 52 Bcf is likely to get a replay next week as the National Weather Service (NWS) forecasts a much below normal accumulation of heating degree days (HDD) in major energy markets. For the week ended Nov. 7, NWS predicts New England will see a relatively light 79 HDD, or 65 below normal, and the Mid-Atlantic will have to endure 57 HDD or a whopping 73 HDDs below normal. The greater Midwest from Ohio to Wisconsin is expected to have just 56 HDD, or 89 below normal.
In overnight Globex trading December crude oil fell a penny to $45.19/bbl and December RBOB gasoline added 2 cents to 1.3813/gal.