April natural gas is expected to open 5 cents higher Friday morning at $1.84 as analysts see oversold market conditions continuing to unwind along with expected cooler conditions next week. Overnight oil markets rose.
Analysts see the market's recent strength as a response to earlier oversold conditions.
"The stage for the ongoing price advance appears to have been set by the April contract's ability to hold support at the $1.61 level at the start of the week," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients. "The advance was accentuated this week by violation of a down trend line that extended back to the beginning of last month. The market had become oversold technically to the point that even minor supportive headlines have proven capable of forcing a substantial spree of short-covering. Most of the outlooks have been gradually favoring some below-normal temperature trends that should be moving into the nation's Midcontinent later next week with some overnight freezing temperatures expected within the upper Midwest.
"While we don't view this cool start to the official spring period as altering the supply-demand balances appreciably, it could potentially slow injections at the start of the shoulder period. Nonetheless, a whopping supply surplus of more than 900 Bcf against last year and some 725 Bcf versus five-year averages will be offering a huge obstacle toward sustainable price gains. And although producers may be reluctant to establish short hedges at current price levels, a huge supply overhang will require some hedge placement amid an environment in which utilities will be reluctant to establish long hedges, especially in the huge price premiums further down the curve."
Gas buyers for ERCOT power generation over the weekend should have plenty of wind power to offset gas purchases. Forecaster WSI Corp. in its Friday morning report said, "A slow-moving storm system will plague Texas during the next one to two days with additional rounds of rain. Temperatures will range in the mid 50s, 60s and 70s. Fair, dry and much warmer conditions will likely return by Sunday into early next week with highs in the upper 70s and 80s.
"A north-northeast breeze will steadily decrease today into early Saturday. Boosts of elevated wind gen are possible during the weekend into early next week. Output will occasionally peak in excess of 10 GW."
In the six- to 10-day period, WSI said the "forecast is for above-average temperatures across the East, West Coast and desert southwest. Near to below average temperatures are expected over much of the interior west and adjacent portions of the central U.S. Today's forecast is colder over central and eastern U.S., but warmer over the West. CONUS GWHDDs are up 7.1 to 76.2 for the period."
In overnight Globex trading April crude oil rose 98 cents to $38.82/bbl and April RBOB gasoline added a penny to $1.4453/gal.