June natural gas is expected to open unchanged Friday morning at $4.57 as Thursday's decline reset a number of trading parameters and upward progression is likely to depend on weather assistance. Overnight oil markets rose.
Although the storage build reported Thursday of 74 Bcf was only a few Bcf over consensus estimates in the low 70 Bcf range, it was a game changer for some. It "prompt[ed] some selling that gathered momentum when 3 week lows were violated. The fact that [Thursday's] supply build was the 3rd consecutive larger than expected injection also conjured up ideas of an evolving trend in which production could finally be accelerating," said Jim Ritterbusch of Ritterbusch and Associates.
"Should this prove to be the case, constructing a bullish case on fundamental merits would be challenged until the hot temperature factor becomes more meaningful. At the same time, today’s fresh three-week lows have applied enough chart damage to shift this market into a near-term range that we would estimate at about $4.50-4.65, parameters that are roughly 15-20 cents lower than what we had been anticipating until today. In the absence of significant bullish assistance from the weather factor during the next couple of weeks, we feel that this market will simply be drifting into a new and lower trading range. We are, however, suggesting holding any bull spread positions."
Significant heat may be a stretch near term. Commodity Weather Group in its morning forecast is looking for a mixed pattern with accumulations of market-bending heat perhaps limited to California. "While 80s should still surge into the Mid-Atlantic again Mon-Tue of next week with risks for near 90-degree temperatures from DC southward, there are more complications showing up today with regard to a potential backdoor cool front for the Northeast by Tue (maybe slipping as far south as Philly) and then even into the entire Mid-Atlantic by next Wed."
"The overall 6-10 day is same-to-cooler today with changes mostly to the cool side for the Deep South, including Texas, as well as over toward the East Coast. Heat in the West still looks very strong toward the middle of next week with near 100F highs for Sacramento and Burbank peaking next Wed. The 11-15 day looks more variable, but should lean seasonal to cool for the Midwest, East, and South with more warm to hot chances in the West again," said Matt Rogers, president of the firm.
Tom Saal of INTL FC Stone in Miami in his work with Market Profile says "The market is displaying a Neutral Week Formation in Market Profile, [and] showing signs of “uncertainty…today’s closing price is very important for next price move. The back years, Cal’15. Cal’17 & Cal’19 are overbought…..should work lower." He expects the market near term to test Thursday's value area at $4.560 to $4.666.
In overnight Globex trading June crude oil rose 35 cents to $100.61/bbl and June RBOB gasoline added more than a cent to $2.9202/gallon.