November natural gas is seen opening a penny lower Friday morning at $2.42 as traders see a market facing mild temperature conditions, anticipated plump, if not burdensome, supplies, and a lack of any meaningful production response. Overnight oil markets were mixed.
According to one analyst, if natural gas prices are going to advance, it will require significant coal-to-gas switching and a hefty blast of cold air. "While this week's selling has largely emanated from a shift back toward milder temperature trends that have now been extended out to about mid-month, a lack of meaningful production response to low prices also continues to weigh on the front of the curve. The reduced output that we had expected to spin off of the recent reduction in declining oil rigs has not been as pronounced as anticipated," said Jim Ritterbusch of Ritterbusch and Associates in morning comments to clients.
"[G]iven limited elevation in HDDs or CDDs at this early stage of the shoulder period, it would appear that additional above-normal storage injections lie ahead. With the supply surplus expected to stretch further, an end-of-season stock of 4 Tcf that will likely be established in about five weeks will be restricting buying interest even into the winter contracts that were supported by weather uncertainties until this week."
Buyers for power generation across the PJM footprint are likely to have ample renewable generation to offset purchases over the weekend. WSI Corp in its Friday morning report said, "A complex and potent storm system will lead to cloudy skies, periods of rain, windy and cool conditions across the Mid Atlantic and the majority of the power pool today into the weekend. Temps will only range in the 50s to mid 60s. It now appears that Hurricane Joaquin will spin out to sea, and the ongoing storm system will depart early next week.
"As a result, it will be partly sunny and seasonable with highs in the mid 60s to low 70s. A north-northeast flow between high pressure over Ontario and the complex frontal system along the East Coast will support elevated wind generation through the weekend. Output is expected to range 3-5 GW at times. Wind gen will subside early next week."
The National Hurricane Center (NHC) reported that at 8 a.m. EDT a "very dangerous" Hurricane Joaquin was grinding on the Bahamas with winds of 130 mph. It was about 45 miles south-southwest of San Salvador and was moving to the northwest at 3 mph. NHC projections showed Joaquin turning to the north and northeast and heading away from a U.S. landfall.
In overnight Globex trading November crude oil gained a penny to $44.75/bbl and November RBOB gasoline fell 3 cents to $1.3344/gal.