The expiring March natural gas contract is set to open 3 cents higher Friday morning at $2.65 as traders note a nominal increase in heating load in the near term. Overnight oil markets fell.
Weather models overnight produced some modest cold going forward. "With so many false alarms this winter, it has become increasingly difficult to believe in colder periods, but the unusual situation of two straight days of model demand gains has earned some credibility on this upcoming briefly colder spell," said Matt Rogers, president of Commodity Weather Group, in a Friday morning report to clients.
"[Friday's] forecast is also weaker with next week's warmth at times for the Midwest, East and South, which gains some demand in addition to this now cold-sided Monday March 6th week. The more skillful European guidance managed to gain demand on both model cycles in the past 24 hours, but they still show warmer ensemble cluster subsets that offer risk to the outlook."
Analysts see any significant price moves contingent upon colder weather, and it appears that a late-season trend to more normal temperatures is unlikely to be sufficient.
"Some models are beginning to favor temperature normalization across many of the northern tier states," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients. "But this is a market that will require broad-based below-normal weather outlooks if price advances of some 10-15 cents are to develop. This late stage of the heating cycle will also be reducing HDDs seasonally in reducing the impact of any cold temperature forecasts should they develop. As a result, we feel that any meaningful price increase will be heavily contingent upon an upswing in power demand and exports with the approach of the shoulder period."
Gas buyers for power generation across the PJM footprint over the weekend should have a healthy amount of wind generation to work with.
WSI Corp. in a Friday morning report said, "A vigorous storm system and its associated cold front will track across the power pool from west to east during the next two days with a round of rain and thunderstorms. Severe thunderstorms and/or a squall line with damaging winds will likely track into western PJM this evening into tonight. The rain and storm risk will shift into the Mid Atlantic during Saturday.
"An increasing south-to-northwest wind associated with low pressure will lead to a period of strong wind generation during the next two days. Another pulse of southwest winds will continue to support elevated wind gen during Sunday. Output is forecast to peak 4-6 GW."
In overnight Globex trading April crude oil fell 43 cents to $54.02/bbl and April RBOB gasoline lost a penny to $1.7360/gal.