December natural gas is set to open 6 cents lower Friday morning at $2.21 as traders see Thursday's price decline as an indication of lower prices to come. Overnight oil markets fell.
Following Thursday's storage report traders were forced to recalculate balances. Tim Evans of Citi Futures Perspective sees a modest 7 Bcf build reported next week and the beginning of substantive draws beginning the week of Nov. 27. "Strong storage withdrawals in the weeks to follow will reduce the year-on-five-year average storage surplus back to 181 Bcf as of Dec. 4.
"There is a reasonable chance that some of the cold from the week ending Dec. 4 will carry over into the following period. In fact, if the jet stream is to stabilize, this weather pattern could persist for several more weeks, catching a market anticipating a warmer than normal winter by surprise.
"The market's failure to rally on the moderately bullish storage surprise suggests we should brace for a further test of the downside, but we continue to view the arrival of stronger seasonal heating demand as more consistent with a short-covering rally back toward the $3.00 level in the weeks ahead. From a fundamental perspective, we think the market has reached a juncture where the lower the price goes, the more bullish we'll become."
Gas buyers for weekend power generation across the MISO footprint may have to pick up the pace as forecasts call for cold temperatures and at best variable wind generation. WSI Corp. in its Friday morning report said, "Seasonably cold conditions are expected [Friday]. However, a wave of low pressure will slide across the lower Midwest through the Great Lakes late in the day through Saturday with a round of snow and rain. A swath of 4-8 inches of accumulation is likely across Iowa, southern Wisconsin, northern Illinois, Indiana and Michigan. This system will usher a reinforcing shot of cold air into the power pool during the weekend. During this stretch, high temps will drop into the mid 20s, 30s and 40s and with lows in the teens and 20s.
"Changeable wind generation is expected. Wind generation will subside this morning, but low pressure will provide a boost tonight into Saturday. After a brief lull, a southwest flow may drive another spike during Sunday into early Monday."
In overnight Globex trading December crude oil fell 34 cents to $40.20/bbl and December RBOB gasoline shed a half cent to $1.2828/gal.