The expiring July natural gas futures contract is set to open 5 cents lower Friday morning at $2.80 as weather forecasts going forward along with pipeline maintenance coming to a close provide little in the way of anticipated stress on supplies. Overnight oil markets weakened.
Analysts see conditions ripe for the return of triple-digit storage builds and resulting price pressure. "This market is currently relinquishing about half of [Thursday's] strong gains as negligible support is emanating from updates to the short-term temperature outlooks," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients.
"Forecasts that we monitor are suggesting mild temperatures with broad coverage with views now extending through about the first third of July. As a result, some triple-digit injections could be seen next month that would resume expansion of the supply surplus following yesterday's contraction of 11 Bcf against five-year averages.
"We expect this dynamic of an increase in surplus to be accentuated by a long-awaited lift in production following recent maintenance that has covered a wider region and has been extended further than widely anticipated. So unless the temperature views show a shift back to the hot side during the coming weekend, we will look for some renewed selling pressures next week. While our long-term downside possibility of $2.50 may prove out of reach, we do see support violation at about the 2.73 level per the newly prompt August contract."
Gas buyers for the weekend across the PJM footprint may have to step up the pace a bit as only modest wind generation is expected. WSI Corp. in its Friday morning report said, "A residual frontal boundary will suppress the best chance of additional rain and thunderstorms across the southern tier of the power pool today. High temps will range in the 70s, 80s to near 90; a vigorous storm system is expected to spin across the power pool tonight into Saturday before it spins up the East Coast by Sunday.
"This late-season storm system will lead to periods of rain and thunderstorms, which may be severe across the lower Mid Atlantic. It will also be breezy and seasonably cool, though temperatures will be highly variable. Weak wind generation is expected during the bulk of [Friday]. However, the expected storm system will likely provide a boost to wind generation during tonight into the weekend with output upward of 2-3 GW. Wind generation will subside from this peak and become variable early next week."
In overnight Globex trading August crude oil fell 50 cents to $59.20/bbl and August RBOB gasoline dropped a penny to $1.9953/gal.