December natural gas is expected to open 5 cents lower Friday morning at $2.58 as traders assess the likelihood of mild conditions and continued storage builds continuing into December. Overnight oil markets fell.
In spite of recent price weakness analysts say its too early to give up on 2017. "We do not see the warm start to Q4 as a significant enough concern to abandon our constructive outlook for natural gas in 2017," said Nicholas Potter of Barclays Commodities. "A warm October and November means March 2017 storage will end at 1.8 Tcf, a 150 Bcf increase from our previous outlook and in line with the five-year average.
"However, if a warm November extends into a warm December, this would be a larger concern for the bullish 2017 thesis. A repeat of heating degree days from last year's warm December would result in end-March storage levels closer to 2 Tcf and keep Q4 cash prices below $3.00/MMBtu for the quarter.
Gas buyers focused on weekend power generation across the MISO footprint are likely to see widely varying amounts of wind generation. "The tail end of a polar cold front will continue to push southward across the Midwest [Friday]," said WSI Corp. in its Friday morning report. "A northerly breeze behind the front will briefly knock temperatures down into the 40s, 50s to low 60s across the aforementioned regions, which are still above average in most cases. This cool-down will be short lived as fair weather and a blustery southwest wind will lead to a surge of warm weather during the weekend into early next week. Once again, max temps will range in the 50s, 60s to mid 70s.
"High pressure will cause wind generation to subside and become light today. Another surge of strong wind gen is likely during tonight into the weekend. Output is forecast to peak 8-11+ GW.”
Tom Saal, vice president at FCStone Latin America, in his work with Market Profile said to expect the market to test Thursday's value area at $2.623 to $2.589, acknowledging that it could test the 50% breakdown target of $2.520. Beyond that, he looks for a test of $2.825 to $2.789.
In overnight Globex trading December crude oil fell 85 cents to $43.81/bbl and December RBOB gasoline fell a penny to $1.3279/gal.