October natural gas is expected to open 3 cents higher Friday morning at $2.69 as traders balance a more intense weather outlook and the emergence of Tropical Storm Ericka. Overnight oil markets slumped.
Overnight forecasts showed an increase in cooling load. "The 11-15 day period forecast is generally a bit warmer than yesterday's forecast," said WSI Corp. in its Friday morning report. "Period PWCDDs are up 2.1 and are now forecast to be 46.1 for the period. Forecast confidence is only average, at best, today. There is uncertainty with the long-term impacts or influence of tropical activity on the pattern and as well as potential changes with the upstream and downstream pattern drivers.
"The forecast has risks in either direction, especially late in the period. Clim[atology] and any shift with the pattern supports a risk to the downside across the eastern half of the nation, while the western half has a slight risk to the warmer side."
Analysts see the warmer forecasts as countering bearish storage numbers. "The ability of the market to shrug off bearish supply side news has been facilitated by further supportive guidance from the demand side in the form of some increasingly warm temperature deviations," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients.
"Updates that are now stretching through the first third of next month are favoring much above normal temperature trends that will be downsizing storage injections beyond next Thursday's EIA release. A sizable upswing into the 75-80 Bcf zone has likely been priced in, and any extension of hot temps toward mid September or storm activity into the GOM could easily force nearby futures up into the $2.80s. But an implied price advance of more than 20 cents from yesterday's close will likely require an 'event,' such as a major hurricane or significant pipeline disruption, neither of which is currently on the radar."
Buyers for power generation over the weekend across the PJM footprint may be kept busy acquiring supply as renewable generation is expected to be light. "High pressure will support partly sunny skies, low humidity and seasonable temperatures across the bulk of the power pool [Friday]. High temps will generally range in the upper 70s to mid 80s. It will trend warmer and humidity levels will gradually creep up during the weekend into early next week," WSI said.
"This warmth and an upper-level disturbance will lead to an increasing chance of widely scattered showers and thunderstorms. High temps will range in the upper 70s, 80s to low 90s. A small boost of output is expected tonight with output as high as 1-2 GW. Relatively light and changeable wind generation is expected during the remainder of the weekend through early next week."
In its 8 a.m. EDT Friday report, the National Hurricane Center said Erika was 90 miles east southeast of the Dominican Republic and winds were back up to 50 mph. It was heading west-northwest at 17 mph and was projected to move northwest toward central Florida.
In overnight Globex trading October crude oil fell 34 cents to $42.22/bbl and October RBOB gasoline shed a penny to $1.3135/gal.