April natural gas is expected to open 3 cents higher Friday morning at $3.00 as overnight trading lifted the market above $3 and analysis of storage data portrays a tightening market. Overnight oil markets rose.
Analysts are taking a close look at a lack of production response to increased rig counts as well as fuel-switching. "This market is proving stronger than we had anticipated, with yesterday's assertive bullish response to a supportive EIA storage figure offering testament to a solid underpinning," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients.
"From here, we can see the market working higher to around the $3.09 area where next resistance should halt this advance regardless of the weekend updates to the short-term temperature views. While these forecasts that are stretching out to about March 24th don't appear sufficiently cold to sustain price strength, they have been enough to force expectations of a reduction in the storage surplus beyond next week's EIA data. And with the approach of the shoulder period, greater focus is being placed on stronger than expected power demand, some of which has emanated from increased coal-to-gas switching as spot prices dropped to below the $3 mark.
"Lack of production response to the dramatic increase in the rig counts since last spring has also proven to be a significant bullish factor," Ritterbusch said.
Overnight weather model runs resulted in higher near-term heating loads. "The latest six-10 day period forecast is colder than yesterday's forecast over the eastern half of the U.S., but the western half is generally warmer," said WSI Corp. in its Friday morning report to clients. "The colder changes outweigh the warmer ones, so CONUS GWHDDs are up 6.2 to 99.5 for the period, which are close to average.
"Forecast confidence is only average, at best, today. There is still uncertainty with details of potential Northeast storm during the onset of the period and yet another potential system by the end of the period."
Although Thursday's EIA implied flow of a 64 Bcf withdrawal was way below five-year averages closer to 136 Bcf, analysts see a tightening market. "This week the -64 EIA stat was 1 Bcf below our estimate of -65. (There was a 4 Bcf reclassification in salt storage within the South Central region)," said industry consultant Genscape in a Friday morning report. "Versus degree days and normal seasonality, the 64 BCF draw appears tight by 1.6 Bcf/d when compared to the prior five years."
In overnight Globex trading April crude oil rose 32 cents to $49.60/bbl and April RBOB gasoline gained a penny to $1.6486/gal.