October natural gas is expected to open 6 cents lower Friday morning at $2.87 as traders set their sights on plump season-ending storage levels and ignore near-term supportive weather. Overnight oil markets were mixed.
Despite being solidly within the confines of the shoulder season, forecasters are continuing to expect above-normal temperatures. In its Friday morning outlook WSI Corp. said, "[Friday's] six-10 day forecast is even warmer than yesterday's forecast over the southern half of the nation, but cooler over the West Coast and the northern tier. As a result, CONUS PWCDDs are up another 1 to 38.3 for the period. This is 16.1 higher than average!"
Analysts don't see the warm weather as having a market impact. "[H]opes for any support off of the weather factor are beginning to diminish. Extended hot temperature forecasts along the eastern portion of the U.S. are seeing some moderation beyond next week while most of the Midcontinent will be seeing normal patterns that will sharply reduce air conditioning requirements," said Jim Ritterbusch in a Friday morning report to clients.
"And on the storm front, lack of any significant threat to GOM infrastructure is forcing some erasure of storm premium. Going forward, the likelihood of major hurricane events will begin to diminish amidst a shoulder period that will be sharply upsizing injections. [Thursday's] EIA supply increase offered no surprises as storage lifted to 3.5 Tcf as expected. And although next week's figure will likely show a larger contraction in the surplus against the averages, we still see possibilities of an additional 450-500 Bcf added to supply by early November when a peak is usually established.
"We are maintaining a bearish stance as we continue to target a further price decline in October futures to the $2.70 area. We are keeping stop protection above 2.99 for now but will likely adjust this stop lower to above today's highs..."
Gas buyers for weekend power generation should have plenty of wind power at their disposal. "High pressure will depart today and allow a broad frontal system to slowly track into and across the power pool during the next three or so days with areas of rain and thunderstorms," said WSI. "Despite the unsettled weather, there will actually be a general moderating trend with highs in the upper 60s, 70s and 80s.
"The frontal system will lead to a rise of wind generation [Friday] into early Saturday with output of 4-6+ GW. After a brief decline, a southwest-to-west wind associated with the northern stream frontal system will lead to a pulse of elevated wind gen during Sunday into Monday."
Analysts see Thursday's 62 Bcf storage build as still representing a tightening market. "Compared to degree days and normal seasonality, a +62 BCF appears tight vs. the prior five years by approximately 2.4 Bcf/d," said industry consultant Genscape in a Friday morning report. "This includes an estimated 10 Bcf impact from the labor day holiday, which is the average estimated impact of Labor Day over the prior five years. Gas burn declined by approximately 36 Bcf week/week due to cooler temps and Labor Day knocking down generation by 33.8 AGWH as well as a 10.6 AGWH increase in renewables. Gas generation was down a whopping 26 AGWH, which equates to approximately 5.2 Bcf/d."
In overnight Globex trading October crude oil fell 90 cents to $43.01/bbl and October RBOB gasoline added a penny to $1.4411/gal.