November natural gas is seen opening 6 cents higher Friday morning at $3.99 as traders brace for a shot of cold air expected to arrive in the next week. Overnight oil markets continued their shuffle lower.
Top traders for the long term are cautious bulls. "Although selling was contained at about the $3.90 area, we feel that the storage number opens the gates for additional slippage to our expected low side parameter of $3.85. For now, the short-term temperature outlook appears slightly bullish but well discounted," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday to clients.
"Additional selling from here of more than 8-10 cents will likely require some mild temperature trends that are not currently on the radar. We don't look for the large speculative entities to press the short side aggressively below today's lows with storage 11.5% below average and with at a time of year that favors seasonal strength. Tomorrow's COT report is apt to show a sharp cut in net non-commercial shorts given the approximate 25-cent price advance that developed during the latest reporting period.
"From a broader perspective, this still looks like a choppy trading affair within a price range that we have defined as about $3.85 to $4.20," Ritterbusch said. "We will look to approach the market accordingly while at the same time gradually establishing deferred bull spread positions as a longer-term strategy that could capitalize on a possible early start to a cold winter."
Weather forecasters for the near term are calling for cooler temperatures to make an appearance at the higher latitudes. Through the middle of next week Natgasweather.com said, "Cooler Canadian air continues to sweep across the northern U.S. along with heavy rains, strong thunderstorms, and even snowflakes into the coldest air. As this system tracks the Midwest and Northeast this weekend, overnight lows will drop into the 30s and 40s, driving early season heating demand. Southern California, including high population coastal cities, will see temperatures in the 90s to lower 100s as offshore winds strengthen. A fresh cool blast will arrive early next week for the north-central U.S. before warming occurs across much of the nation late in the week."
Tom Saal, vice president at INTL FC Stone, in his work with hedge accounts said that "call options strategies provide efficient win-win protection at reasonable cost." He noted that the November-March $4.30 call option strip was 17.5 cents bid at 19.5 cents offered in late Thursday trading.
The Labor Department in its 8:30 a.m. EDT closely watched September Employment Report indicated non-farm payrolls increased by 248,000, much stronger than expected. The unemployment rate fell to 5.9%, the first time below 6% since 2008.
In overnight Globex trading November crude oil fell 2 cents to $90.99/bbl and November RBOB gasoline retreated 2 cents to $2.3876/gal.