October natural gas is set to open 4 cents lower Friday morning at $3.03 even though forecasts turned slightly warmer. Overnight oil markets rose.
Medium range forecasts call for increased cooling loads and lower heating loads. "The latest 11-15 day forecast is warmer than yesterday's forecast over the East and California," reported WSI Corp. in a morning report to clients. "The Central U.S. and Rockies are cooler.” Continental United States (CONUS) population-weighted cooling degree days “are up 1.7 for Days 11-14 and are forecast to be 23 for the whole period. CONUS” gas-weighted heating degree days “are down to 10.5, which are 11.7 below average.
"A potential weakening of the pattern and -WP correlations offer a cooler risk/trend over the Central U.S., while the Northeast and West Coast could run warmer. However, a slower progression supported by some cluster guidance supports a persistent pattern with a cooler risk over the West and a warmer risk over the eastern two thirds."
Traders see the market supported by near term weather forecasts as well as export activity but remain on the sidelines. "The storage injection of 91 Bcf was much larger than we had anticipated but was quickly followed by an approximate 5 cent advance to three week highs," said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients. "It would appear that some 'algo' type programs appeared timed to establish purchases immediately following the release of the number regardless of whether it was bearish or bullish. Given average industry expectations for around an 84 Bcf increase, yesterday's figure appeared bearish as it stretched the surplus against five year averages to 43 Bcf. Furthermore, an additional increase in the supply overhang is likely next week given this week's mild temperatures.
"But this market appears largely focused on upcoming warm patterns that will be forcing some AC usage for a couple of weeks across a large portion of the nation. In the background, the market is also receiving a price lift from renewed export activity following Harvey that will be contributing to some downsizing in seasonal injections once the temperature trends shift. Overall, we are staying on the sidelines for now as we still have difficulty constructing a scenario that would carry nearby futures above the 3.14 level amidst the arrival of the shoulder period when the weather factor will lose its bite amidst limited need to insert any hurricane premium."
In overnight Globex trading October crude oil rose 6 cents to $49.95/bbl and October RBOB gasoline added a penny to $1.6371/gal.