September natural gas is expected to open 11 cents lower Friday morning at $3.80 as traders see a market mired in a near-term trading range and expected to see ample storage levels at the end of the injection season. Overnight petroleum markets rose.
Traders have come to the conclusion that as bullish as Thursday's inventory numbers may seem, underlying market factors point to a rough balance between supply and demand for the moment and a market unlikely to make near-term substantive moves.
"Although this market received a boost from a 78 Bcf storage injection that fell short of average ideas by about 5 Bcf, we viewed bullish reaction as uninspiring, and we see this market evolving into a choppy/near-term trading affair as attention begins to shift toward the shoulder period," said Jim Ritterbusch of Ritterbusch and Associates.
"[Thursday's] reported injection reduced the deficit against five-year averages from about 20% to 19%, and we continue to look for a reduction of about 1% per week through the rest of the injection cycle. This would imply an end-of-season supply peak of about 3.6 Tcf that should be viewed as ample to meet winter needs given the dynamic of record production. On a shorter-term basis, this market's lack of sustained response to a shift in temperature forecasts away from unusually cool trends and toward more normal patterns is suggestive of a balanced market, at least as far as dynamic factors are concerned. The static force of a 19% shortfall against normal levels has been well priced in.
"Furthermore, a shortfall in supply at this time of the year doesn't present a short-term challenge as far as supply availability is concerned. We also continue to monitor a weak physical trade that will likely maintain pressure on the front switch with contango expansion of another 1-2 cents likely prior to expiration. All in all, we have shifted our trading posture from short-term bullish to neutral as we anticipate a trade between about $3.74 and $4.02 when looking across next week."
WeatherBELL Analytics in its Friday morning 20-day Energy Outlook said to look for warmer temperatures, "but not hot in the Midwest and Northeast for week two. Meteorologist Joe Bastardi said, "Where it's dry, you can fry. Texas is where heat hits and holds over the next 10 days, [and] a new pool of cool reforms from northern Rockies into northern Plains, then spreads southward and eastward." He added that the SOI (Southern Oscillation Index) was "coupling" for ENSO (EL Nino Southern Oscillation).
"My confidence is high this morning as the trough that pushes through days four through seven (in back of the current major trough) does its dirty work with rains through the Midwest and Northeast, chopping apart the latest heat wave rumor. The precipitation chart shows the lack of rain in Texas, where it will fry, but farther north it's wet."
In overnight Globex trading September crude oil gained 20 cents to $95.78/bbl and September RBOB gasoline added 2 cents to $2.6855/gal.