February natural gas is expected to open 2 cents lower Friday morning at $2.12 as weather forecasts continue to moderate, traders are now having to factor in the downhill portion of the winter usage cycle and technicals deteriorate. Overnight oil markets cascaded lower.
Natural gas traders aren't immune to the weak petroleum sector. "Although this market appears to be getting swept up in bearish spillover form the new lows in the liquids, the temperature factor has also seen a swing to the bearish side in recent days," said Jim Ritterbusch in a morning report to clients. "Adding to downside momentum was yesterday's smaller than expected storage withdrawal that fell short of street ideas by about 7-8 Bcf. Furthermore, chart deterioration following yesterday's support violation at the $2.19 level is prompting liquidation of fresh spec longs that were established late last year, to move to the sidelines.
"But, although our acceptance of profits out of short holdings in yesterday's trade appears premature, we are not ruling out another price pop back to above the $2.20 mark next week following possible cold adjustments to the short-term temperature views during the upcoming extended holiday weekend. But we will also note that the weather factor will soon be subsiding in importance given this late stage of the heavy usage cycle. This will force greater focus on non-weather related items such as production, coal to gas displacement and industrial usage."
Gas buyers for weekend power generation across the broad MISO footprint look to have plenty of renewables generation to offset gas purchases. WSI Corp. in its morning report said "A weak and fleeting storm system will support a chance for light snow and rain [Friday], mainly east. A northerly flow behind this system and subsequent arctic cold front will drive the next shot of bitterly cold arctic air into the power pool during the weekend into early next week.
"This air-mass may be even colder than last weekend as sub zero min temps will return to the north along with highs hard pressed to rise into the single digits and teens. The storm system and influx of arctic air will likely cause wind gen to rebound during today into the weekend. Output is forecast to top out between 7-9 GW. Wind gen will likely decrease and become light by Monday."
In overnight Globex trading February crude oil fell $1.80 to $29.40/bbl and February RBOB gasoline dropped 4 cents to $1.0325/gallon.