December natural gas is expected to open 3 cents higher Friday morning at $2.96 as overnight weather models suggest increasing cold Canadian air short term. Overnight oil markets rose.
"The forecast carries a small cold change in the East, with this adjustment focused early on with stronger high pressure spanning the Northern U.S. and late with a second round of high pressure," said MDA Weather Services in its morning six-to-10 day outlook. "These surface highs originate from an established cold source region over western Canada, and with that comes the risk for additionally colder air.
"That said, models differ in the timing details associated with these highs, and there is also risk that temperatures could be warmer if these highs are further separated versus the preferred Euro Ensemble projection. Aboves are fairly steady in the Southwest for the period.”
Top traders aren't quite ready to go long. "These highs at the $2.96 level appear vulnerable with a run at $3.00 resistance likely before day's end," said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients. "But we will view this resistance level as staunch unless the short term temperature views change appreciably during the coming weekend.
"Meanwhile, the spot trade at Henry Hub is developing an unusually large discount against nearby futures of as much as 20 cents that could force further expansion in the winter spread carrying charges. This would only discourage additional buying interest on the part of both speculators and commercial concerns. So, while we can still see a first inevitable sustained cold spell spiking the December futures contract to above the $3.20 mark during the next three weeks, we remain hesitant to suggest a long position for now."
In overnight Globex trading December crude oil gained 22 cents to $54.76/bbl and December RBOB gasoline rose 2 cents to $1.7902/gal.