August natural gas opened a penny lower Friday morning at $3.03 as weather forecasts moderate and traders react cautiously to inventory data that was expected to drive the market higher. Overnight petroleum markets rose.
Ritterbusch and Associates senses that the market is sending off some bearish vibes given its inability to advance off of last week's seemingly bullish EIA storage report that offered a smaller than expected 46 Bcf injection. In a morning report to clients it said while contraction in the surplus is likely to slow appreciably next week, the short term temperature views continue to favor additional contraction in the supply excess against 5 year averages of around 40 Bcf next month in our opinion.
"This dynamic should prove sufficient to keep values supported above last week's lows of about $2.87 per nearby futures. However, our expected advance up into the 3.22-3.25 zone is being pushed back a couple of weeks as some moderation is beginning to show up in some of the weather views toward mid-month. All factors considered, we are still sidelined in this market in anticipation of some wide price swings in both directions with prices apt to post negligible change a couple of weeks down the road.
"For now, we will await price pullbacks into the $2.87-$2.92 zone to approach the long side for an investment type trade given what is shaping up to be a much smaller storage cushion with 2-3 months remaining in the CDD season. We are, however, keeping a hold on long Sept '17-short March '18 bull spreads."
Gas buyers for electrical generation throughout the vast PJM footprint over what could be an extended holiday weekend will not have much in the way of renewable power to work with should incremental purchases be necessary. WSI Corp. in a morning report to clients said a few storms may be locally strong. Despite the chances for storms, a southwest flow and partial, hazy sunshine will support seasonably warm/hot and humid conditions. Max temps will generally top out in the 80s to low 90s. Humidity levels will be elevated with dewpoints in the mid 60s to near 70. This will help hold min temps in the mid 60s to mid 70s.
"A southwest to northwest breeze will support modest wind gen during the next two days. Output will range 1-3 GW. Wind gen will subside and become relatively light and variable during Sunday into early next week."
In a longer time frame WSI said conditions had moderated just a touch. "The 6-10 day forecast is initially warmer. However, cooler changes were made to portions of the Plains and East during the back half of the period. The West is now even warmer. CONUS PWCDDs are down 0.9 to 62.5, which are 10.7 above average.
"Models are hinting at a more amplified flow, which supports some warmer risks over the western and central US. The Mid West and Northeast could run a touch cooler."
In overnight Globex trading August crude oil rose 29 cents to $45.22/bbl and August RBOB gasoline gained fractionally to $1.4793/gallon.