July natural gas is expected to open unchanged Friday morning at $2.58 as traders see near-term weather as providing enough market support to preclude a supply-induced selloff. Overnight oil markets jumped.
Going forward, traders see weather as the near-term price driver but also don't see much more than another 10 cents higher in spot futures.
"We are still viewing the short-term temperature views that are now stretching out to about month's end as sufficiently supportive to force fresh highs into the $2.63-2.68 area that we still view as a favorable sell zone in referencing July futures," said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients Thursday.
"While conceding to additional contraction in the supply surplus of another 25-30 Bcf or so in next week's EIA report, we still see upside to above $2.68 as extremely limited given a supply surplus of 704 Bcf per today's release. Thus far, a hot start to the summer has accomplished the task of downsizing the storage injections in precluding the need of low prices to accomplish such a task. From here, weather will remain as the main price motivator. But we still see the first significant sustainable cool down as capable of forcing a weak expiration to the July contract. As we shift focus to the August futures contract, any short positions established within the $2.68-2.73 zone should be established or maintained with stop protection above the $2.75 level on a close only basis.”
Buyers for gas-fired electrical generation in ERCOT will have their hands full over the weekend and will have to deal with triple-digit heat as well as fluctuating renewables. It will be hot, with highs in the 90s to 105 F range. "Elevated humidity levels will push the heat index into the upper 90s to 110 F range," said WSI Corp. in its Friday morning forecast. "An east-southeast flow off the Gulf of Mexico will increase during Sunday into early next week, [and] this will promote increasing cloud cover and a chance of scattered showers/storms, which will cause temperatures to ease downward into the 90s to near 100.
"A diurnally fluctuating southerly wind will support elevated wind generation during the next day or two, but this will relax during Sunday into early next week. Late night output maxima will peak 6-9 GW, but subside to 2-4 GW during the middle of the day. Hazy sunshine will bolster solar gen during the next couple of days, but increasing clouds will dampen total solar prospects during Sunday into early next week."
In overnight Globex trading futures bounded higher. July crude oil surged $1.04 to $47.25/bbl and July RBOB gasoline added 4 cents to $1.5027/gal.