September natural gas futures limped lower in dull trading Friday as analysts suggested that the market was not showing signs that it was capable of advancing further. At the close September natural gas had eased 4.8 cents to $4.060 and October had slid 5.6 cents to $4.071. September crude oil dropped 34 cents to $85.38/bbl.
Traders cited the trading in natural gas as weak “compared to the action that has been around all week [in petroleum and equity markets],” said a New York floor trader. He added that he wasn’t sure whether natural gas was ready to trade below $4 again, and “the market is trying to build a base.”
It was his view that a stock market that didn’t continue falling would add a positive psychology to energy markets. “Even though we are a little down today [Friday], I think the market will be supported.”
Tim Evans of Citi Futures Perspective was less convinced of support developing and saw the market “seeing some light profit-taking off Thursday’s bounce, which we see as a relatively weak performance given that [Friday’s] six- to 10-day and 11- to 15-day temperature forecasts both look warmer and more supportive than a day ago. The 11- to 15-day is particularly impressive with above normal temperatures expected for all of the continental U.S. and Canada too. As temperature patterns go, this is about as bullish as it gets. The intensity of the heat could be higher, of course, but the geographic coverage couldn’t be wider.”
MDA EarthSat is looking for warmer temperatures to return to the Midwest in its six- to 10-day forecast. “Some slight cooler tweaks were made to the outlook [Friday] over the Northeast with the pattern looking a bit more variable and unsettled. Compared to the near term, there is still expected to be a decent warming trend for the central U.S., as aboves [normal temperatures] return to much of the Midwest.” The forecaster added that “This trend is supported by a weakening of the upper latitude block and a transition back to the +EPO [Eastern Pacific Oscillation] pattern, which favors some ridging over this region. While most models are a bit warmer, the West Coast was kept near normal as the cool ocean temp anomalies continue to keep coastal areas cooler.”
Bullish temperature forecasts notwithstanding, others don’t see a significant market reaction. “Although the temperature factor appears tilted toward the bullish side, deviations from normal don’t appear significant and the market already appears to be looking ahead to the upcoming shoulder period when weather focus will be almost entirely placed on the hurricane factor,” said Jim Ritterbusch of Ritterbusch and Associates. “While some tropical storm activity is showing development in the distant Atlantic, no significant threat appears at the present time. By and large, [Friday’s] trade appeared to point out a market that is still not poised for a major price advance. While we leave open the possibility of an up move to the $4.25 area next week should some storm premium injection be required, we also see eventual fresh lows as a result of a continued strong production pace,” he said in an afternoon note to clients.
There is plenty of activity to go around in the Atlantic Basin. At 5 p.m. EDT the National Hurricane Center (NHC) reported three tropical systems and one tropical depression. NHC said the three systems also had the potential to develop into storms in the following 48 hours. The easternmost system is a broad low-pressure system and was located 525 miles southwest of the Cape Verde Islands and had a 40% chance of development. A sharp trough of low pressure was 1,000 miles east of the Leeward Islands and was estimated to have a 50% chance.
The third system was characterized as an area of disturbed weather and was situated 700 miles north-northeast of the Leeward Islands and NHC predicted that it had a 20% chance of becoming a tropical cyclone in the following 48 hours.
Tropical Depression Six formed Friday 260 miles north of Bermuda and was moving away from the U.S. mainland. It was holding winds of 35 mph and was moving to the east-northeast at 16 mph.
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