September natural gas is set to open 2 cents lower Friday morning at $3.87 as weather forecasts moderate and traders expect production gains to ultimately dominate short-term weather developments. Overnight oil markets fell.
Analysts were generally surprised by Thursday's advance in the face of a bearish storage injection.
"[Thursday's] bearish response to the larger-than-expected 88 Bcf storage injection proved short-lived as the market appeared to revert focus back toward some current hot temperature trends that appear sustainable through about month's end," said Jim Ritterbusch of Ritterbusch and Associates. "While we had expected the much cooler eight-14 day forecast to weigh on values following a bearish storage figure, such was not the case. Although the initial response to the EIA figure approximated 10 cents, this week's lows were never challenged. Although we look for an eventual violation of the July-August double bottom, this market appears poised for a re-test of our expected resistance at the 3.95 area.
"While it is apparent that some sequential downsizing of storage injections will be seen during the next couple of EIA releases in the process of stalling the dynamic of 'deficit contraction in large chunks,' we continue to see a strong production pace as capable of offsetting occasional bullish weather developments. With the approach of the shoulder period, we will look for values to settle into a comparatively narrow range. We have defined low side parameter as existing at the $3.65 area. On the upside, down trend line violation helped to facilitate [Friday's] gains and could also accommodate a stretch of our high side parameter with nearby futures making another run at the $4 mark. But sustaining a $4 handle will prove problematic short of a major storm event."
El Paso Natural Gas Co. Friday morning lifted a force majeure effective for cycle three of Friday's gas day that had been in place on its Havasu Lateral (L1104) in the western portion of Arizona. The force majeure was enacted Wednesday afternoon following the discovery of a leak on the line. The force majeure took capacity on the line from 650 MMcf/d to zero for the evening cycle of Thursday's gas day.
Eastern power buyers seeking weekend deliveries may not have to purchase much in the way of incremental volumes if forecasts for the broad PJM grid are correct. WSI Corp. in its morning outlook said, "Scattered showers and thunderstorms continue along a wavy stationary frontal boundary [Friday] - Saturday. Sunshine returns Sunday-Tuesday as high pressure becomes more prevalent over the region. Temperatures run above normal in the west with highs in the 80s and 90s and below normal in the east, especially near the coast, with highs in the 70s and 80s. Trending warmer in the east as well early next week. Total precipitation runs between 0.25-1.00 inches with locally heavier to 1.50-2.00 [inches] in the West."
WSI said to expect "weak wind power generation...right through the weekend with relatively benign output forecast (mostly peaking between 1-2 GW). The recent and anticipated wet weather over the next couple of days will lead to elevated streamflow and favorable hydro prospects throughout the forecast period.
"The six-10 day forecast is not as warm over the northeast quadrant of the nation. It is also not quite as warm over the Northwest."
Major storm events may be limited to the load-killing effects of a tropical depression near the East Coast. The National Hurricane Center in its 8 a.m. EDT Friday report said, "Shower and thunderstorm activity associated with a small area of low pressure located north of the Virgin Islands remains disorganized...However, environmental conditions are expected to be more conducive for development when the disturbance moves near or over the southeastern Bahamas on Saturday, and a tropical depression or tropical storm is likely to form over the weekend or by early next week." NHC said the likelihood of the pattern turning into a tropical storm in the succeeding 48 hours was 60%, in the succeeding five days, 80%.
In overnight Globex trading October crude oil fell 32 cents to $93.64/bbl and October RBOB gasoline shed a half cent to $2.5932/gal.