August natural gas is set to open 2 cents lower Friday morning at $2.90 in spite of what traders see as a market with supportive weather, a supportive cash market, and a supportive storage dynamic. Overnight oil markets fell.
Analysts see a market ready to push through $3. "Although this market was unable to post fresh highs overnight, its ability to push above [Thursday's] peak suggests a bull market that is very much alive and apt to realize a $3 price handle next week," said Jim Ritterbusch of Ritterbusch and Associates in Friday morning comments to clients.
"The short-term temperature views remain tilted bullish with above normal temperatures extended out toward end of month, according to most forecasts. However, deviations from normal don't appear appreciable across the northern half of the U.S., and this is precluding strong upside follow-through at the present time.
"Nonetheless, the cash market at Henry Hub appears well supported despite the fact that industrial demand will be downsized in conjunction with the upcoming three-day holiday period. This comparatively strong cash basis is likely to keep the front August-September switch inverted in providing a significant bullish portent in our opinion. Furthermore, this market may still need to price in another sharply downsized 40-50 injection in next week's EIA report as a result of this week's warm temperatures and disrupted supply out of a major gas processing plant."
Others aren't so sure about a sustained push through $3 any time soon. Traders saw Thursday's 6-cent advance as impressive and said, "It has a shot a $3, but that is a tough, tough area. Did you see what happened in the crude oil? As soon as it hit $50 it came off 18 cents. $50 was such a benchmark for crude oil and that is the way traders are going to look at $3 natural gas,” said a New York floor trader."
Gas buyers for power generation over the weekend across the PJM footprint should be faced with less of a challenge as temperatures are expected to moderate, but wind generation is also expected to lessen. Forecaster WSI Corp. said, "high temps will range in the upper 70s and 80s along with mins in the mid 50s, 60s to near 70. A residual frontal boundary and ripple of low pressure will be a focal point for rain and thunderstorm activity during Sunday night into early next week. Wet weather will continue suppress temperatures.
"The cold front passage will boost wind generation today into Saturday morning, but output will only top out around 2 GW range. Wind gen will relax and become light during the remainder of the period.”
Longer term, WSI is looking for a cooler West and warmer East. "Above average period anomalies are expected across much of the central and eastern U.S. during the six-10 day period. Period anomalies will range closer to, if not a tad below, average over the West. [Friday's] forecast is a bit warmer over the eastern half of the nation and cooler over the western half. As a result, CONUS PWCDDs are up 0.7 to 69.8 for the period."
In overnight Globex trading August crude oil fell 14 cents to $48.19/bbl and August RBOB gasoline gave up 2 cents to $1.4771/gal.