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Fundamentals, Technicals Eroding; October Called A Penny Lower

October natural gas is expected to open a penny lower Friday morning at $2.64 as fundamental and technical analysts sense a deteriorating environment and the market remains in its seasonal low-price window. Overnight oil markets slipped.

Analysts are looking for weak near-term price action. "This market is likely to finish this week on a soft note with values slipping slightly," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients. "With weekend temperature shifts no longer a significant concern, we look for the money managers, etc. to be more on the offensive as the week winds down. Yesterday's chart breakdown to new lows is important in our view despite the fact that it was quite brief and there was no downside follow-through.

"We look for selling to be revived next week amidst lack of supportive weather influence. We also feel that the market may still need to discount a sizable upswing in injections per next week's EIA release."

Gas buyers over the weekend across the PJM footprint won't have a great deal of renewable energy at their disposal to offset purchases. WSI Corp. in its Friday morning forecast said, "A southwest-to-northwest wind will support modest wind generation during the next two days. Output is forecast to vary between 1 to 3 GW. Wind gen will subside and become changeable during the weekend into early next week.

"A cold front and wave of low pressure will support an increasing chance of showers and thunderstorms over western PJM during the next couple of days. Otherwise, unseasonably warm and moderately humid conditions will persist in the Mid-Atlantic with highs in the 80s. The cold front will push into the Mid-Atlantic during Sunday morning with a slight chance of a few showers, [and] this will attempt to usher high pressure and more seasonable conditions into the power pool as the weekend progresses and into early next week," the forecaster said.

Once the EIA released its storage figure Thursday, October quickly broke to $2.603 but rebounded. Market technicians are thinking that may well augur further declines. "Well, we got the break beneath the $2.624 low we were looking for.  However, natural gas promptly found support into the $2.602-2.595-2.585 (0.618 <a>=<c>) zone," said Brian LaRose, technical analyst at United ICAP in closing comments Thursday.

"So, is that all she wrote? Only one way to signal that Thursday's $2.603 low marked the end of this decline, bulls need to climb back above $2.753-2.769. Will be looking for a slide to 2.484 (<a>=<c>) otherwise."

In overnight Globex trading October crude oil dropped $1.20 to $45.70/bbl and October RBOB gasoline fell a penny to $1.3679/gal.

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