October natural gas is set to open unchanged Friday morning at $2.81 as traders balance the effects of Thursday's lean storage build with an anticipated moderation in weather patterns. Overnight oil markets sank.
Traders are looking to position themselves on the short side of the market. "The market is following through to the upside overnight in contrast to the sharp downside reversal in the liquids," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients. "The chart improvement implied by today's one-week highs would suggest some upside follow-through, with the October contract working up into the $2.85-2.90 area within the next couple of sessions. However, we are having much difficulty building a case for values north of the $2.90 level given limited support from the weather factor.
"While updates to the six-14 day temperature views are suggesting a swing back to above normal trends across the eastern half of the U.S., we will further emphasize that CDD accumulation will be downsized seasonally and that the daily temperature updates will be diminished in importance going forward.
"We shifted off of a bearish stance yesterday via the October contract's advance to above the $2.79 level. We will look to re-engage into the short side should this current price rally advance sustain into the $2.85-2.90 zone. While conceding to a much smaller injection per yesterday's EIA release than we had anticipated, we believe that this number has been well discounted and that the market will need to focus attention on next week's report that will be providing a sharp upswing in storage given this week's comparatively mild and broad based temperature trends."
Gas buyers needing weekend supplies for power generation across PJM Interconnection will have a combination of warmth followed by a cool-down and a jump in wind generation to deal with. "A summer like pattern is expected to continue [with] mid-summer-like hot and humid conditions again [Friday]," said WSI Corp. in its Friday morning forecast. "This air mass and a weakening frontal boundary will support partial hazy sunshine and a chance of showers and thunderstorms, mainly over western PJM. Max temperatures will top out in the 80s to mid 90s.
"A cold front will sweep across the power pool from west to east during the weekend with a chance of a broken line of showers and thunderstorms. This will usher a drier and cooler air mass into the power pool for Sunday into Monday, though max temps will still top out in the mid 70s and 80s.
"After a brief lull today, a northwest wind behind a cold front will lead to a sharp surge of wind generation during Saturday. Output is forecast to top out in excess of 3 GW. Wind gen will relax during Sunday into early Monday, but a warm south-southwest wind will cause wind gen to ramp back up early next week."
In overnight Globex trading October crude oil fell 92 cents to $46.70/bbl and October RBOB gasoline shed 4 cents to $1.3763/gal.