September natural gas is called 6 cents lower Friday morning at $2.61 as traders discount near-term weather and continued erosion of the storage surplus. Overnight oil markets fell.
Analysts see ending storage at close to last year's record levels, but they recommend standing aside the market for now.
"This market has received a lift off of a supportive EIA storage figure as well as some minor bullish adjustments to the short-term temperature views," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients. "Expected cooling across a large portion of the nation's Midcontinent is giving way to some normalization while hot temps along the Eastern Seaboard are looking a bit more pronounced.
"Additionally, this year's combination of reduced production and increased electricity generation demand continues to eat away at a large surplus that has been cut by more than half for this year. Yesterday's smaller than expected storage increase cut the overhang to 405 Bcf, and additional reductions would appear to lie ahead. But with end-of-season supply still headed toward the 4 Tcf level, in our view, storage would appear ample to easily meet the needs of an unusually cold winter."
Gas buyers for power generation across the PJM footprint will have a modest amount of wind generation to offset power purchases over the weekend. "Warm, humid and occasional stormy conditions will give way a cooldown. Seasonably hot and moderately humid conditions are expected across the majority of the power pool during the next couple of days, but this air mass will trigger scattered thunderstorms each day," said WSI Corp. in a Friday morning report.
"High temps will generally vary in the 80s to low 90s. Minimums will range in the mid 60s and 70s. A cold front will traverse the power pool from west to east with rounds of showers and thunderstorms late Saturday into early Monday morning. It will remain warm and humid ahead of the front, but a cooler and drier air mass will filter into the power pool early next week. High temps will retreat into the 70s to mid 80s. Minimums will dip into the 50s and 60s.
"A southwest-to-northwest wind associated with a cold front will lead to a sharp boost in wind generation tonight through early Monday with output around 3-4 GW. High pressure will cause wind and wind gen to drop off early next week."
At 5 a.m. EDT Friday the National Hurricane Center (NHC) reported that Tropical Storm Fiona was 1,240 miles west of the Cabo Verde Islands and was traveling west-northwest at 10 mph. Maximum sustained winds were 45 mph. NHC projected a storm path to Bermuda. NHC also identified a tropical wave 500 miles southwest of the Cabo Verde Islands and gave it a 10% chance of tropical storm formation within the succeeding 48 hours.
In overnight Globex trading September crude oil gave up 17 cents to $48.05/bbl and September RBOB gasoline fell 2 cents to $1.4742/gal.