September natural gas is set to open 2 cents lower Friday morning at $2.85 as traders see a market at the upper end of its recent trading range and at the same time factor in expected above-normal temperatures in the weeks ahead. Overnight oil markets continued to melt down.
Top traders are looking for a spot to sell. "We have indicated this week that the one- to two-week outlooks didn't appear to justify September values below the $2.70 level," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday. "With the eastern half of the U.S. apt to see some significantly warmer than normal trends developing within the six-10 day time window, some additional sharply reduced injections would appear to lie ahead well into next month.
"[Thursday's] 17 Bcf injection was well below average industry ideas as well as our own outlook for a 31 Bcf build. As a result, the surplus against five-year averages shrunk another 44 Bcf and is likely to see a similar reduction again in next week's data. This appeared to offer a setting for today's price spike as the market responded assertively to the upside off of the bullish combo of a comparatively modest injection and bullish adjustment to the temperature outlooks.
"We had been looking for a bearish storage figure that would offer a buying opportunity below the $2.60 level. However, today's advance forces us to consider the short side of the market given our extended perception of the choppy/sideways trade with nearby values generally fluctuating between the $2.70-2.85 level across most of next month. In sum, we are staying in a neutral camp for now but may look to approach the short side on a further price advance toward the highs seen at the start of this month."
Gas buyers for weekend and Monday packages across the MISO footprint look to have relatively mild conditions to work with, but that all changes next week. "An upper-level disturbance pushing across Canada will push a weak cold front across the region during the [weekend], resulting in a period of seasonably cool temperatures today and tomorrow," said WSI Corp. in a Friday forecast. "This cold front will support scattered thunderstorms throughout the period. High temperatures will run in the 70s-80s through the weekend.
"However, models are indicating a return of hot and humid weather next week where temps should jump back into the upper 80s and 90s. A northerly flow will promote wind generation near 2-3GW today into tomorrow. Wind gen is expected to become more favorable Sunday-Monday, where output could peak between 4-6GW."
In overnight Globex trading September crude oil dropped 44 cents to $40.70/bbl and September RBOB gasoline lost 2 cents to $1.2734/gal.