January natural gas is expected to open unchanged Friday morning at $2.18 as traders see a market precariously holding on to current price levels. Overnight oil markets rose.
Market observers see a resilient market but one poised to decline. "This week's main feature, from our vantage point, has been the market's ability to maintain value at around last Friday's close despite an extension of warmer than normal temperature views that are now stretching out to about the 18th of this month in most cases," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients.
"The above-normal temperature expectations are expected to be concentrated within the heavily populated northeast quadrant of the U.S. This reduction in residential demand will be translating to some smaller than usual storage declines that will keep the supply surplus in expansionary mode. This is why we still see a high probability of a drop to about the $2.05 area, possibly next week if the mild forecasts continue. But it should also be noted that the cash market has held up well despite this week's mild conditions at price levels about 20 cents above last month's low."
Gas buyers needing incremental supplies for power generation over the weekend across the ERCOT footprint will have some wind generation to offset gas purchases. WSI Corp. in its Friday morning report said, "High pressure will settle into the south-central U.S. during the majority of the forecast period. This will generally lead to fair weather and near to slightly below average temperatures. Highs will range in the upper 50s, 60s to low 70s. Lows will dip into the 30s and 40s.
"A southerly flow will drive elevated wind generation during the next couple of days. Output is forecast to peak tonight upward of 8-10 GW. Wind gen will relax and become changeable during Sunday into early next week."
If analysts figures are correct, next week's storage withdrawal report is likely to be even greater than this week's 53 Bcf. According to reports, temperatures have been lower, thus precipitating higher gas usage. Preliminary estimates for the week ending Dec. 4 show a range of estimates from a pull of 45 Bcf to as much as 88 Bcf and an average of 61 Bcf, according to Reuters. Last year, 47 Bcf was withdrawn and the five-year pace is 65 Bcf.
The U.S. Department of Labor reported non-farm payrolls increased by 211,000 during November, slightly greater than analyst estimates of 200,000. The figure is not expected to deter the Federal Reserve from raising interest rates. The unemployment rate held steady at 5%.
In overnight Globex trading January crude oil rose 49 cents to $41.57/bbl and January RBOB gasoline gained a penny to $1.3034/gal.