December natural gas is expected to open 3 cents lower Friday morning at $3.55 as traders are unable to identify any fundamental weather patterns able to offset ever-increasing production. Overnight oil markets slipped.
According to top analysts, a more supportive weather outlook is going to be required for this market to establish a bottom, let alone any kind of advance. "We didn't view [Thursday's] EIA (Energy Information Administration) report as a game changer since it wasn't far removed from our expectation," said Jim Ritterbusch of Ritterbusch and Associates. "And while the surplus against average levels narrowed to only 58 Bcf, such an overage appears ample to meet upcoming winter needs with production cruising along at a record pace.
"Until the short-term temperature views shift in the direction of some below-normal trends, this market will continue to have difficulty placing a price bottom. [Thursday's] close below our expected $3.60 support level would appear to favor additional selling that could carry to the pre-expiration November lows of $3.48. While closing the November-December gap would be a counter-seasonal development, current bearish supply-side forces combined with mild temperature views into mid-November can easily provide ingredients for an additional 10-cent decline from [Thursday's] settlement."
Ongoing production increases are likely to keep the bulls corralled. The EIA reported Thursday that Lower 48 natural gas production for August reached a record 74.82 Bcf/d, up 0.3%. Stout declines were seen in the offshore Gulf of Mexico and Louisiana, but the "Other States" category including the Marcellus region surged 2.4% to 27.02 Bcf/d.
Weather forecasters see a series of fickle cool and warm patterns with no clear trend. Commodity Weather Group in its six- to 10-day and 11- to 15- day outlooks sees "a speedy pattern situation continu[ing] with transient warm and cool periods affecting the Midwest, East and South over the next two weeks. Most of the changes [Friday] were tweaks to make the warmer events a bit warmer and the cooler events a bit cooler, but the national demand picture is close to unchanged if not slightly lower demand.
"This continues to be a tricky pattern as it cannot be cleanly called a cold or warm-prevailing one. In the 11-15 day, there are still hints of a Midcontinent cold push edging forward to around day 13, but the European ensembles wash out the impacts by days 14-15...," said Matt Rogers, president of the firm.
In overnight Globex trading December crude oil fell 70 cents to $95.68/bbl and December RBOB gasoline shed 2.5 cents to $2.5618/gallon.