October natural gas is seen opening a penny lower Friday morning at $2.67 as traders see a greater market impact from near-term weather forecasts than the moderately supportive gas storage report. Overnight oil markets tumbled.

Based on Thursday’s thinner than expected Energy Information Administration (EIA) reported storage build, analysts see a slight firming of the supply-demand balance.

“The 68 Bcf build for last week lifted the total in working storage to 3.261 Bcf, a surplus of 473 Bcf to a year ago and 127 Bcf above the five-year average for the date,” said Time Evans of Citi Futures Perspective in closing comments Thursday. “While smaller than expected, the build was still more than the 63 Bcf five-year average injection and therefore slightly bearish on a seasonally adjusted basis.

“The data does suggest a tighter supply-demand balance, particularly relative to the 81 Bcf projection from our own storage model. Since our model uses a blend of several prior weeks to calculate its baseline, last week’s report doesn’t translate into a radical change in outlook, but it does result in a less bearish picture compared with a day ago.”

He now concludes that by Sept. 15, the year-on-five-year surplus will reach 154 Bcf “confirming that the market is becoming better supplied on a seasonally adjusted basis, but this looks like a significantly lighter downward pressure on prices than a day ago.”

In spite of the modest bullish tonality to the report Evans said the “bullish surprise still wasn’t enough to break October natural gas out of the $2.632-2.735 range…We continue to favor an eventual break to the upside in anticipation of stronger winter demand, but we can’t rule out a try for new lows first.”

Trade-wise Evans suggests working an October buy stop at $2.76 as an long entry into the market with a protective stop at $2.62 to limit risk once the trade has been initiated.

In a noon update Thursday Natgasweather.com said, “Nothing has changed regarding weather patterns as they still look quite bearish due to a strong Canadian weather [pattern] having swept through much of the central, northern, and eastern U.S. with near to below normal temperatures, easing natgas-based cooling demand considerably compared to earlier this week. We expect reinforcing cool blasts to follow into the northern and eastern U.S. into early next week, preventing hot high pressure from setting up over these critical natgas regions.”

In overnight Globex trading October crude oil dropped $1.26 to $44.66/bbl and October RBOB gasoline lost 3 cents to $1.3610/gal.