September natural gas is set to open a penny higher Friday morning at $2.98 as traders keep to their bullish stance and weather is seen having less of an impact. Overnight oil markets rose.
Traders are sensing a positive tonality to the market and are staying long. "[W]e are viewing the storage factor as sufficiently bullish to support additional price gains in September futures of around 14 cents from yesterday's settlement," said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients. In his view “the supply surplus narrowed much more than we had expected [Thursday] to the 111 Bcf level and appears poised for additional significant contraction going forward through the next couple of EIA releases. As a result, a shift in temperature trends across a significant portion of the U.S. next month toward a sustained hot spell could easily force an erasure of the long standing supply overhang in keeping the market highly sensitized to any tropical storm activity, nuke outages or pipeline disruptions as this summer proceeds.
"While the rollover to the September contract as prompt month will reduce the influence of the daily updates to the temperature forecasts, we feel that an unusually cool August will be needed to preclude additional price strength from here. In other words, it will be difficult to keep nearby futures south of the $3 mark and we still see high probability of a test of four week highs as early as next week.
"Near term bullish stance still advised with long September positions representing a hold with stops raised to the $2.87 level with $3.11 still targeted," he said.
Overnight weather models turned slightly warmer. "[Friday's] 11-15 day period forecast is a shade warmer East and West when compared to yesterday's forecast," said WSI Corp. in a morning forecast. "Net changes result in a +0.6” continental United States population-weighted cooling degree days “addition to 57.7 for the period. [However], forecast confidence is considered well below average standards due to abnormally high uncertainty in the models."
Gas buyers faced with the task of making purchases for power generation across the broad PJM footprint don't look to have much in the way of renewable energy to offset purchases. "A strong coastal low is forecast to spin up on Saturday, keeping much of the eastern regions wet and cloudy through the weekend," said WSI. It forecast that high pressure will settle in its wake, producing fair weather over the weekend with total precipitation of 1 to 2 inches.
"Wind gen looks to move into a slightly more favorable state [Saturday] with output peaking near 3GW. Wind gen looks to fall off over the weekend into early next week, with sub 1 GW production."
In overnight Globex trading September crude oil rose 7 cents to $49.11/bbl and September RBOB gasoline rose fractionally to $1.6257/gal.