November natural gas is set to open unchanged Friday morning at $3.34 as traders consolidate positions before the weekend. Overnight oil markets were mixed.
Analysts see a market driven more by technical factors than fundamentals. "[T]his market remains much stronger than we had anticipated as technically inclined traders still have numerous reasons to work the long side. Our expected resistance at the $3.30 level was easily shrugged off, and it now appears that a gap on the weekly charts of last December will be filled via an additional price upswing to the 3.40 area," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday.
"Although it is still easy to build a bearish case as a record peak supply is still possible early next month, the market strength is apparently reflecting a continued dynamic of surplus contraction. [Thursday's] narrowing of around 13 Bcf in the overhang against five-year averages could easily be followed by a similar contraction in next week's data. A slower than expected production pace appears to be contributing to a significant portion of the sub-normal supply increases. The process of reversing this month's upside acceleration may require an extension of mild temperature trends into early November.
"Although we had alluded to the possibility of shorting this market on rallies, we will defer for now given the magnitude of the ongoing advance that is developing with very little assistance from the weather drivers."
Traders needing to buy gas for power generation in ERCOT for the upcoming weekend will have plenty of weather and plenty of wind generation to work with. "A Heat Alert has been issued. The tail end of a weakening cold front and a trailing upper-level low will keep the chance of rain and embedded thunderstorms in the forecast across northern portions of the state [Friday]," said WSI Corp. in its Friday morning forecast.
"This will impede temperatures across the northern tier, but the southern half of the state will remain warm and moderately humid, with max temps in the 80s to mid 90s. A developing south-southwest flow will promote partly sunny, unseasonably hot and moderately humid conditions during the weekend into early next week
"A diurnally influenced south-southwest wind will support periods of strong wind generation, especially during the evening and overnight hours. During these daily peaks, total output is forecast to range 10-12 GW. Variable cloud cover will impede total solar generation today, but increasing sunshine will support solar prospects during the weekend into early next week."
In overnight Globex trading November crude oil rose 32 cents to $50.76/bbl and November RBOB gasoline fell fractionally to $1.4761/gal.