October natural gas is expected to open 2 cents higher Friday morning at $2.95 as weather models show warmth extending out into October and traders mull a long position. Overnight oil markets were mixed.
Traders see the market range-bound but given Thursday's price drop are now looking at the long side of the market. "While we had expected longer term support at the $2.88 level to be out of reach, this price low for this month is obviously back in play with a test of such forthcoming as early as Monday if weekend updates to the short term temperature views offer more bearish guidance," said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients.
"The trade of the past week in which a sizable price advance was quickly followed by an equivalent sized price plunge could typify this market's trade well into next month with nearby futures generally gravitating at around the $3 mark. The lack of significant influence from the temperature factor and the inability of hurricane activity to significantly influence gas balances will likely preclude gas futures from breaking out of this month's trading range.
"We may look to approach the long side for a 20-25 cent trading turn should the weekend forecasts force nearby values down toward the $2.88 area where our risk/reward parameters will be favorable to long holdings."
Weather wise "[Friday's] forecast is warmer over the east central U.S. than yesterday's outlook, especially the northern tier," said WSI Corp. in its morning 11- to 15-day outlook for clients. Continental United States population-weighted cooling degree days “are 13.2, 0.9 above yesterday and 1.9 below normal.” Gas-weighted heating degree days “are 18.9, - 8.1 from yesterday and 12.1 below normal."
WSI said risks to the forecast include the West Coast [running] warmer than forecast early in the period before a ridge is expected to weaken and push east. The Midwest could still run a little warmer given models favor greater pattern progression today than in previous runs.
Gas buyers across the broad PJM footprint will have to rely on solar generation more than wind power to offset purchases for electrical generation. "Summer like conditions will continue generally fair, unseasonably warm and moderately humid conditions are expected throughout the forecast period," said WSI. "Max temps will generally range be in the 80s and lower 90s. Mins will range from the 60s to lower 70s. Dewpoints will rise from the 50s to 60s over the northern Mid-Atlantic this weekend. They should be generally in the 60s elsewhere through early next week with even some lower 70s over the southern Mid-Atlantic by early next week.
"A variable southerly flow will support light and changeable wind gen during the forecast period. Output will periodically reach 1-2 GW. Mostly sunny skies will support solar gen prospects."
In overnight Globex trading November crude oil fell 19 cents to $50.36/bbl and November RBOB gasoline rose a penny to $1.6160/gal.