June natural gas is set to open 2 cents lower Friday morning at $2.06 as traders assess the likelihood of increased, if not oversized, storage injections in the weeks to come. Overnight oil markets fell.
Analysts are holding on to a bearish outlook. "This market is continuing to have difficulty following through in either direction as is often the case in the shoulder period when the weather factor subsides as a pricing influence," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients.
"Although another cold spell is expected to move into the Midwest region later next week, this supportive force is currently being negated by expected mild trends along the eastern seaboard. As a result, some upward acceleration in supply injections is expected beyond next week's EIA storage report that will likely offer a supply build similar in magnitude to yesterday's 68 Bcf increase.
"But contraction in the surplus is likely given some cold patterns during the first half of this week that saw some low overnight temperatures lifting CDDs. And while the nearby gas futures are entitled to some weather premium given the possibility of a late May hot spell, the market now appears to be discounting normal trends that have narrowed the differentials between June futures and lower-priced next-day Henry Hub values."
Gas buyers for power generation across the MISO footprint will need to be on their toes as forecasters are expecting only modest renewable generation through the weekend. "Fair and warm weather are expected [Friday]," said WSI Corp. in its Friday morning report. "High temps will range in the 70s and 80s, [and] a cold front will sag southward across the Midwest and Great Lakes as the weekend progresses with a round of showers and a few storms. This may lead to variable and changeable temperatures.
"A wave of low pressure will develop along the front and support a chance of showers and thunderstorms across the power pool early next week. Storms may be strong.
"A west-southwest to north wind associated with the cold front will likely support a pulse of wind generation today into Saturday. Output is forecast to peak 6-8 GW. Wind gen will subside during Sunday, but the next potential storm system will aid wind gen early next week."
The Labor Department reported that non-farm payrolls in April increased by 160,000, less than expectations of more than 200,000. The unemployment rate held steady at 5%, and the increase was the lowest since September.
In overnight Globex trading June crude oil dropped 40 cents to $43.92/bbl and June RBOB gasoline fell a penny to $1.4862/gal.