July natural gas is expected to open a penny higher Friday morning at $4.77 as traders see a continuing storage deficit and no reason to not keep working this market from the long side. Overnight oil markets gained.
Traders see Thursday's Titanic advance as due in part to turbulence in the petroleum sector. "Prior to the issuance of the [storage] report, we would have viewed an injection of 107 Bcf as worth a price advance of about 8-10 cents," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday to clients.
"[Thursday's] excess beyond this expectation appeared driven by aggressive short-covering after some minor chart points were violated. Additionally, some forecasts are beginning to shift in the direction of some warming temperature patterns, and some buying spillover from the oil was apparent. Regardless, we still feel that the supply deficit will need to be cut much more before supply worries ease enough to enable significant downside price follow-through.
"Obviously, some large funds are trading this market from both sides and contributing to elevated late-week price volatility. Just as this week's selloff exceeded our expectations, [Thursday's] advance also proved much more than we had anticipated. At the end of the day, we still view this market as one that needs to be worked strictly from the long side."
Weather forecasts call for a Midwest cooling in the six- to 10-day period. In its Friday morning outlook, MDA Weather Services said, "The first half of the period progressed well from [Thursday] with a round of heat and humidity still playing out of the East back into the eastern Midwest before an expected cool-down.
"This cool-down comes with greater intensity and focus in the East today where model trends suggest high pressure descends southeast from Canada, bringing a cold front through the Great Lakes and Midwest to East mid to late period. While the East trends a bit cooler the central U.S. shifts warmer late in the period as another round of active weather moves in and quickly overpowers the cool air."
In overnight Globex trading July crude oil gained 27 cents to $106.80/bbl and July RBOB gasoline rose a half cent to $3.0879/gal.