April natural gas is set to open 3 cents higher Friday morning at $2.83 as traders attempt to reconcile Thursday's bearish storage report with technical resiliency. Overnight oil markets strengthened.
Longer-term weather models overnight turned colder. "[Friday's] 11- to 15-day period forecast is for a cold Midwest/East when compared to yesterday," said forecaster WSI Corp. in a Friday morning report to clients. "CONUS GWHDDs are up +10.2 to 79.1 for the period. Forecast confidence is considered below average as models are illustrating increased uncertainty in the pattern.”
WSI said the European model is in conflict with the GFS (Global Forecast System). "The ECMWF (European) offers colder risks to the pattern under a flex of a midcontinental/southwest ridge late in the period, resulting in a transient cold shot over the Northeast...The forecast continues to hold with a warmer than average over the East, but we have begun to increase GWHDDs due to recent trends in the ECMWF"
Traders see something of a conundrum between prices that seem stubbornly in place and a supply situation that becomes more bearish with each passing storage report. "This market continues to hang out near the highs of the past couple of sessions following a show of support that extends back to about the middle of last week," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients.
"The ability of the market to hold value in the face of what appeared to be an unusually bearish EIA storage report is providing a bullish pricing portent. But we are not seeing enough shift in the short-term temperature views to force an adjustment in the expansionary surplus trends that were highlighted by yesterday's data. The surplus against five-year average levels has increased to almost 300 Bcf and will likely be expanding further by an additional 70 Bcf or more with next week's EIA release. And with reliable short-term forecasts soon to be stretched to the beginning of spring, any major temperature deviations from normal toward the cold side will likely be packing little pricing punch."
Gas buyers for weekend power generation across the MISO footprint can expect ample renewable energy to offset natural gas purchases. "Sharp cooling trend to seasonable levels [are] expected over the next few days, but another large warming trend [is] expected over the weekend,” WSI said. “High pressure will produce fair conditions, yet seasonably cold temperatures to end the week. But another major warming trend is in store over the weekend, where high temps should rise back into the 50s-80s in through next week. Exceptional wind gen [is] in store over the weekend into early next week where output should rise and hover near 10 GW.”
In overnight Globex trading April crude oil rose 3 cents to $52.85/bbl and April RBOB gasoline gained a penny to $1.6590/gal.