June natural gas is set to open 3 cents higher Friday morning at $3.21 as traders sense a buying opportunity following Thursday's bearish Energy Information Administration (EIA) storage report. Overnight oil markets rose.
Following the less than expected decline Thursday after the release of a bearish (+68 Bcf) inventory build, traders are thinking bulls were waiting in the wings ready to initiate buying. "Otherwise, we saw no significant change today in weather forecasts or other fundamental inputs to drive buying," Jim Ritterbusch of Ritterbusch and Associates said in closing comments Thursday.
"This looks like a wide-swinging trade capable of frustrating both the bulls and the bears. Although the supply surplus fell less than expected by only around 18 Bcf per today's data, the market is likely pricing in a larger contraction in the surplus against averages within next week's EIA data. We are still sidelined from a trading perspective, but we also feel that the 25-cent price plunge seen this week is underscoring an amply supplied market with which to begin the CDD cycle. We are leaving a downside target of $3.05 on the table for now while we are also allowing for a price recovery back to around the 3.30 area."
During the weekend, gas buyers over the ERCOT power pool will have plenty of challenges with regard to renewable offsets. "A wet and stormy pattern will support a cooling trend, and warm and humid conditions in combination with a slow-moving storm system anticipated to traverse the central U.S. will lead to rounds of locally heavy showers and strong thunderstorms during the next two days," said WSI Corp. in its Friday morning report to clients. "Large hail, damaging winds and tornadoes are risks. Max temps will range in the upper 70s, 80s to near 90. Two additional disturbances will keep the chance of rain and storms in the forecast during Sunday into early Tuesday morning.
"The first storm system will support elevated wind gen [Friday] into early Saturday morning. Output is forecast to peak upward of 8-11 GW. Variable wind gen is expected during Sunday-Monday. A northwest wind should provide a spike of output during Tuesday. Variable cloud cover will impede total solar gen on a daily basis."
In overnight Globex trading June crude oil rose 63 cents to $49.98/bbl and June RBOB gasoline gained 2 cents to $1.6251/gal.